A SCARCITY OF BUILDING MATERIALS DROVE up construction spending for the 13th consecutive month in February, pushing it to a record annual rate of $1.05 trillion. Accounting for more than half of total construction spending, private residential construction has been hit especially hard by the wholesale price hikes. The NAHB estimates higher material prices increased the cost of building a home by $5,000 to $7,000 in 2004.
From February 2004 through February 2005, the price of steel mill products soared 37.7 percent, gypsum (used in wall materials) jumped 18.5 percent, and concrete increased 9.4 percent, as reported by the Bureau of Labor Statistics. The price of lumber has zigzagged “like the teeth of a saw” throughout the past two years, says Ken Simonson, chief economist for the Associated General Contractors of America. Although the current lumber price is below the high levels of a year ago, it started climbing again in November to reach a 7.3 percent increase in February.
Several factors have contributed to the surge in cement prices. Because the U.S. only produces 80 percent of the cement it consumes, it depends on imports. However, rapid growth in international trade has upped shipping rates while creating delivery delays, and anti-dumping duties on Mexican cement “make it prohibitively expensive” to import from the nation’s southern neighbor, explains Simonson. Moreover, development in countries such as China, which uses more than two-fifths of the world’s cement, has sapped up much of the supply.
High demand caused by the housing boom and oscillating duties on the import of Canadian lumber have jacked up prices for lumber and wood products, which account for about one-third of the material costs to build a home.
Rising petroleum costs have further complicated construction expenditures, jumping roughly 35 percent from a year ago. The price hike has affected equipment operation costs, forced fuel surcharges, and created higher priced asphalt, roofing, and insulation materials.
