The Cost of Construction Materials is Rising Nationwide

Categories: Essentials Homes Planning Real Estate

Published 07/26/2021

Nationwide, the challenges contractors are experiencing with fast-rising materials costs, uncertain delivery times, and rationing of vital inputs are due to the ongoing global construction struggles with materials shortages and prices.

The steep material cost increases tell only part of the story — One example is a potential shortage of steel form ties used in concrete formwork. The US-based Concrete Foundations Association (CFA), representing cast-in-place contractors, has announced an industry-wide effort to mitigate the shortage.

While the domestically manufactured concrete form ties intend to meet rising demand and address cost issues, a significant volume of the supply has transitioned to China imported form ties over the last decade.

The Bureau of Labor Statistics (BLS) released its producer price index report for June 2021. It showed that construction materials prices were up 3.2% in the month, seasonally adjusted. The index was 20.4% higher than its year-earlier level.

That is close to the total monthly and yearly increases in March, where the selling price for goods used in construction was considered the highest recorded in the 35-year history of the index. That jumped 3.5%, while the annual increase to March was 12.9%.

Overall prices for processed goods for intermediate demand rose by 1.9 percent. That index was 22.6% higher than its year-ago level.

For reference, the changes in these indexes compare with a 5.4% rise in the all-items consumer price index (CPI-U) for the 12 months ending in June. The CPI-U was up 0.9% for the month. Over the last 3-months, the unadjusted CPI-U has risen at an annualized rate of 10.3%.

The shelter portion of the CPI-U was up 0.5 percent in June. It was up 2.6 percent over the prior 12 months.

Yield Pro (PRO) compiled the BLS reported price changes for our standard list of construction commodities. These are commodities whose prices directly impact the cost of constructing an apartment building. The two right-hand columns of the table provide the percent change in the price of the construction commodities from a year earlier (12 Mo PC Change) and the percent change in price from the prior month (1 Mo PC Change). If no price data is available for a given commodity, N/A will reflect the lack of change.

This is a major issue for companies working with supply chains with "just-in-time" management strategies and unable to fulfill contracts. That also highlights the continuing vulnerability of industries such as construction. When required materials become unavailable — or prices soar due to their scarcity.

Click here to learn more about how this affects the construction industry on a global scale. And click here to read more data on the spread of rising construction materials prices. Don’t forget to schedule a call with Darryl Glass today for assistance in buying, selling, or managing a commercial property in the San Francisco Bay Area!