Price of Building Materials
The price of building materials is a popular topic of conversation in architecture right now. Prior to the pandemic, the price of construction materials was pretty stable. But that is not the case any longer. In fact, prices have risen precipitously. In an effort to wait out the pandemic-related increases, some clients are delaying the beginning of construction in the hopes that materials prices will return to “normal.” But will they? Read on to better understand the situation and how it impacts architectural projects.
What’s with the Price of Building Materials?
Prices have gone up for every building material, including steel, framing lumber, and paint. The increase in the price of building materials is due to a variety of factors, triggered by government shutdown orders which halted production and disrupted the supply chain.
Ten Factors that Contribute to Shortages and Price Increases
- The increased cost of fuel for vehicles that are used to ship materials
- Less price competition because some suppliers went out of business during the pandemic
- Fewer workers are available to produce materials and equipment
- Fewer drivers are available to ship materials and equipment
- Fewer laborers are available to build structures, putting upward pressure on wages
- Less availability of raw materials used to build products and equipment
- Higher material demand due to more home improvement projects
- Higher consumer demand for new, bigger homes
- Factories shut down and stopped production during the pandemic
- Overall uncertainty put a drag on businesses moving forward
How Much Have Prices Gone Up?
Do you wonder how much the price of building materials has gone up? A lot. For us, wood studs are the “poster child” of the pandemic building material price increases. Before the pandemic, wood studs cost about $3 each at your local lumber yard or home center. Studs are often used to build the interior and exterior walls, so the budget line item cost is significant. During the pandemic, the cost of wood studs went from $3 up to $12 each. In a recent commercial project, the wood stud line item in the budget increased from $8,000 to $25,000. Understandably, some clients decided to wait out the increase and build later.
And wood studs were only one item that increased in price. Now imagine this volatile pricing scenario with multiple line items in a client’s budget, and you can see why construction starts were impacted.
The Bureau of Labor Statistics (BLS) issues the producer price index report, the PPI program measures the average change over time in the selling prices received by domestic producers for their output. The PPI December 2021 data confirms soaring prices of energy, iron and steel, and double-digit leaps over the past 12 months for many construction necessities such as aluminum, copper and brass mill shapes, lumber and plywood, and plastic construction products. The Associated General Contractors of America publishes a monthly report showing historical and recent changes in producer price indexes and employment cost indexes for construction materials, building types, and subcontractor segments. Here is the Percentage Change in Producer Price Indexes (PPIs) and Employment Cost Indexes (ECIs) for Construction, 2016-2021 report.
Hope for Pricing Stability & Materials Availability
However, there’s some hope for pricing stability in the future. We’ve seen signs of price reductions, although we don’t anticipate prices will fall to pre-pandemic levels. We also feel there will be improved availability of materials in the future. As the country gets back to work and a more normal business climate prevails, producers will respond to demand and fill orders.
We observed this first-hand on a recent family vacation to the Upper Peninsula of Michigan, an area with considerable logging operations. We observed heavy logging traffic in the area, with full truck beds going from forest to lumber mill to fill the increased demand.
What do we suggest when prices go up and availability goes down? If possible, we work with our client and the contractor to find a suitable alternative product or source. Sometimes, we can make a material substitution for one that is cheaper and more readily available. For example, steel studs are sometimes substituted for wood studs and vice versa. Sometimes it makes sense to delay the project.
You’ll be glad to know that, at the time of writing, the price of wood studs has stabilized at $4 each, down from a high of $12 during the dark days of the pandemic in 2020. However, from this one example, you can see how the price of building materials and their availability impacts architectural projects, resulting in longer project schedules, fewer material options, increased project costs, and fewer material sources.
