Led by a decline in softwood lumber and steel mill prices, overall building material prices fell in September with the notable exception of ready-mix concrete, which continues to grow at a rapid clip. And while gypsum prices edged lower last month, they are up more than 20% over the past year.
In tandem with a slowing housing market and economy, the prices of building materials decreased 0.3% in September (not seasonally adjusted) according to the latest Producer Price Index (PPI) report. The PPI for goods inputs to residential construction, including energy, declined for the third consecutive month in September (-0.1%).
Prices have fallen 2.3% since June, the largest three-month drop since April 2020. However, these modest price declines have occurred when material prices were already at extremely elevated rates.
And while lumber and steel prices have trended down in recent months, the prices of ready-mix concrete and gypsum building materials have continued their climb dating back to early 2021.
Not only is gypsum a major component of drywall, it is also a critical ingredient to the Portland cement used to manufacture ready-mix concrete. High demand for cement combined with lower imports of aggregate due to a large quarry shutdown in Mexico have spread thin the supply of domestically produced ready-mix concrete as well as gypsum. As drywall and cement are used in many applications outside of residential construction, prices have increased even as single-family construction has cooled.
The PPI for softwood lumber (seasonally adjusted) declined 2.9% in September following a 5.2% drop in August. Softwood lumber prices are 14.5% higher than they were a year ago but have fallen 39.6% since March. The index remains 41.9% above pre-pandemic levels.
Steel Mill Products
Steel mill products prices decreased 6.7% in September and have fallen 16.1% over the past four months. The index is at its lowest level since June 2021, but prices of steel mill products are nearly double their pre-pandemic levels, on average.
The PPI for ready-mix concrete (RMC) increased 1.4% in September — its sixth consecutive increase — and has risen 11.6% over the past year. The index has climbed 8.9% year-to-date, the largest September YTD increase in the series' 34-year history.
The monthly increase in the national data was primarily driven by a 2.6% price increase in the South region and partially offset by a 0.7% decline in the Northeast. Prices were flat in the Midwest and edged 0.3% higher in the West.
Gypsum Building Materials
The PPI for gypsum building materials edged 0.2% lower in September — just the second monthly decrease in two years. Prices have increased 20.2% over the past year and are up 46.0% since January 2020.
NAHB senior economist David Logan provides more analysis in this Eye on Housing blog post.