BNi Construction Costs 2023
Posted: March 3, 2023 | Cost Trends
Source: US Department of Labor, Producer Price Index
Housing continues its slide but at a reduced rate. Improbable as it seems, housing is gaining some ground and buyers are returning despite elevated mortgage rates. It's still not at last year's levels but a welcome sign in the economy. In addition, 25,000 jobs were added in the construction industry with 20,000 in commercial and 5,000 in residential. One cautionary note is that economists are now predicting office occupancy may not return to pre-pandemic levels for decades. As a result, we shouldn't expect any upturn in office construction. We still need to deal with the continuing labor shortage, but all in all it's still a good time for construction.
Material prices are seeking some sort of level. Much of the industry is still shell-shocked from the rises and falls of last year, and it is approaching volatile material costs with great apprehension. Oil seems to be hovering in the 70-80 dollar range. The moves by the Fed seem to be working and inflation and interest rates appear to be stabilizing. Availability of materials is getting better with lead times considerably reduced. Overall things are better than they were two years ago, but no one seems to think that we're completely out of the woods yet.
Brick is up 8% again over the last year. Historically, brick was somewhat stable with average increases of 1 to 1.5%, but since 2020 it has averaged increases of 8% per year. We thought that a reduced residential demand would affect brick's trajectory, but it only seems to have fueled the fire.
Still on a tear, but at a reduced rate. Last year gypsum increased 10% after back-to-back increases of 18%. We just don't know right now what the future holds, but a quick look at the graph tells us that the ride may not be quite over yet. Hold on.
Asphalt is up 7% for the last twelve months. It was slowing down but keep watch for some new upward movement. The graph looks like a virtual roller coaster. Economists were seeing crude oil becoming weaker, but recently we're noticing slight increases in the 5 to 10% range. With the continued geopolitical uncertainty, it's anyone's guess.
Steel posted gains of 33% last year and is now down 3-5% for this year. Prices remain very high so even though they seem to be leveling off we really don't know what to expect. One to watch.
Lumber continues its wild ride. Even after gains in the last month of 17%, lumber is down for the year by 25%. One note: lumber is still exceedingly high compared to pre-pandemic levels and may remain there for the near future, the slightest uptick in housing will affect it greatly.
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