Homebuilding supply costs surge at fastest pace in over a year

Homebuilder supply costs in June, compared to the same time in 2023, rose by the greatest amount since early 2023, even as prices for lumber and steel products pulled back, according to new analysis.  

Prices for residential construction goods finished 2.65% higher in June compared to levels from the same month a year earlier. The rate headed upward from a revised 2.36% surge seen in May. The June increase is the largest since February 2023, according to analysis of U.S. government data from the National Association of Home Builders. 

June prices also increased 0.19% month to month compared to a fall of 0.26% in May. Year to date, prices for residential construction goods have taken a different course from other economic trends, NAHB said. 

"Despite overall inflation declining, prices for inputs to residential construction have accelerated since the start of the year, leaving homebuilders to continue to deal with higher building material prices," wrote Jesse Wade, NAHB economist and director of tax and trade policy analysis, in a research post. 

In contrast to the monthly increase in building material costs, the latest Consumer Price Index showed inflation declining 0.1% between May and June. Rising prices contributed to falling homebuilder sentiment in June as well, with the monthly NAHB/Wells Fargo measure dropping to its lowest mark this year.  

Homebuilder supply prices were higher overall despite falling in some essential categories. The seasonally adjusted number for softwood lumber came in 7.41% lower year over year. But it also came in higher by 3.41% from the previous month, reversing course from the 5% decline in May. Lumber costs remain lower than their levels during the pandemic but currently stand above where they were in 2019.

Non-seasonally adjusted prices of steel-mill products were down 15.01% from June 2023 and 1.18% from the prior month. In May, costs took a 13.81% fall but rose 0.54% on a monthly basis. The year-over-year tumble in June was the biggest since last August. 

Lower steel and lumber costs were offset by price growth in other materials, with non-seasonally adjusted gypsum products coming in 2.32% higher annually but unchanged between May and June. 

Meanwhile copper products posted price gains of 12.64% year over year but dropped from the previous month's mark by 2.67%. 

The cost of ready-mix concrete also increased 6.51% from June 2023 and 0.45% between May and June. Prices were seasonally adjusted.

"Compared to other building materials, ready-mix concrete continues to feature year-over-year growth above 5%. This has been the trend since late 2021," according to Wade.