Concrete Products Lead Building Materials Prices Higher


After four consecutive declines, the producer price index (PPI) for inputs to residential construction less energy (i.e., building materials) rose 0.3% in February 2023 (not seasonally adjusted) follow a 1.1% increase in January (revised), according to the latest PPI report. Price growth of goods inputs to residential construction, including energy, gained 0.4% over the month. Prices have increased 2.9% over the past 12 months. Ready-Mix Concrete The trend of ready-mix concrete (RMC) prices continued its historic pace as the index increased 0.8% in February after gaining 0.7% in January (revised).  RMC prices have increase in all but two months since January 2021. The monthly increase in the national data was broad-based geographically but was primarily driven by a 4.2% increase in the Northeast. Prices 0.8% in the West, 0.5% in the South, and were unchanged in the Midwest. Softwood Lumber The PPI for softwood lumber (seasonally adjusted) fell 0.8% in February–the seventh consecutive monthly decline. Since peaking in March 2022, the index has fallen by nearly half (-47.1%) but is still nearly 20% above the January 2020 level. Gypsum Building Materials The PPI for gypsum building materials climbed 0.5% in February after edging down very slightly the month prior. Gypsum products prices are 12.5% higher than they were a year ago but began stabilizing in August 2022. Prices have been stable—up just 0.7%–in the six months since. Steel Mill Products Steel mill products prices increased 2.6% in February, more than offsetting the 2.4% decline seen the month prior. This was the first monthly price increase since May 2022. Even so, prices have dropped 26.0% since May 2022 and are down 21.2% over the past 12 months. Services The price index of services inputs to residential construction rose 0.2% in February following a 0.7% increase in January. Prices have declined 7.7% over the past year despite increasing in four of the past five months. Transportation of Freight The price of truck, deep sea (i.e., ocean), and rail transportation of freight decreased 0.8%, 0.5% and 1.1%, respectively, in February. Of the three modes of shipping, trucking prices have exhibited the largest slowdown since early 2022. Related ‹ Builder Confidence Edges Higher in March but Future Outlook UncertainTags: Building Materials, building materials prices, construction costs, Gypsum, inflation, lumber, ppi, producer price index, ready-mix concrete, softwood lumber, steel

Concrete Products Lead Building Materials Prices Higher2023-03-15T12:19:54-05:00

Materials Remain Builders’ Top Challenge, but Inflation and Interest Rates are Threatening


By Ashok Chaluvadi on February 13, 2023 • The price and availability of building materials again topped the list of problems builders faced last year, while interest rates (along with general inflation and negative media reports) moved considerably up the list.  According to special questions on the January 2023 survey for the NAHB/Wells Fargo Housing Market Index, building material prices were a significant issue for 96% of builders in 2022. The second most widespread problem in 2022 was availability/time it takes to obtain building materials, cited by 86% of builders.  These were the same two problems that topped the list in 2021.  Cost and availability of labor has also been a relatively widespread problem, reported as a significant by 82% of builders in 2021 and 85% in 2022, a result that is not surprising given the large number of unfilled job openings in the construction industry. Compared to 2021, some of the problems became significantly more widespread in 2022. High interest rates were a problem for only 2% of builders in 2021, but this increased to 66% in 2022. Rising inflation in the US economy was a significant problem for 63% of builders in 2021, compared to 85% in 2022.  And 26 percent of builders said negative media reports making buyers cautious was a significant problem in 2021, compared to 55 percent in 2021. Even more builders—a full 93%—expect high interest rates to be a problem in 2023, up strongly from the 66% who said it was a problem in 2022.  Moreover, both the current and expected numbers were much higher in the recent survey than at any time in the 2011-2021 span. Compared to the supply-side problems of materials and labor, problems attracting buyers have not been as widespread, but builders expect many of them to become more of a problem in 2023. Negative media reports making buyers caution was a significant problem for 55% of builders in 2022, but 79% expect them to be a problem in 2023. Buyers expecting prices or interest rates to decline if they wait was a significant problem for 49% of builders in 2022, compared to 80% who expected it to be an issue in 2023. Concern about employment/economic situation was a problem for only 41% of builders in 2022, but 73% expect it to be a problem in 2023. Gridlock/uncertainty in Washington making buyers cautious was a significant problem for 38% of builders in 2022, compared to 54% who expected it to be a problem in 2023. Finally, buyers unable to sell their existing homes was a significant problem for only 13% of builders in 2022, but 52% expect it to be a problem in 2023. For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full HMI January2023 Special Survey REPORT. Related ‹ Loan Demand Declines as Credit Standards Tighten in Q4 2022Tags: Building Materials, economics, eye on the economy, home building, housing trends report, inflation, interest rates, single-family

Materials Remain Builders’ Top Challenge, but Inflation and Interest Rates are Threatening2023-02-13T09:19:33-06:00

OMB Proposes Standards on Building Materials Made in America


The Office of Management and Budget (OMB) has proposed new standards to determine if construction materials for federally funded infrastructure projects are made in the USA.  The new guidance, required by the Infrastructure Investment and Jobs Act—also known as the Bipartisan Infrastructure Law (BIL)—“sets standards to carry out the statutory requirement that all manufacturing processes for construction material occur in the United States.” Federally funded infrastructure projects include housing development that receives any federal support such as through the CDBG and HOME programs. Covered Construction Materials and Manufacturing Standards The Build America, Buy America Act (BABA)—part of the BIL—requires that OMB issue standards that define ‘‘all manufacturing processes’’ in the case of construction materials. Initial guidance (memorandum M–22–11) issued in April 2022 fell short of this and instead provided non-binding guidance on the definition of construction materials. The latest proposal includes an expanded list of products considered construction materials and proposes standards for ‘‘all manufacturing processes’’ for the manufacture of construction materials. Among construction materials covered by the guidance are lumber, drywall, glass, and plastics. The guidance includes domestic manufacturing process standards for the following construction materials. Defining Infrastructure According to OMB, infrastructure includes roads, highways, and bridges; water systems, including drinking water and wastewater systems; electrical transmission facilities and systems; utilities; broadband infrastructure; and buildings and real property. OMB instructs Federal awarding agencies to interpret the term ‘‘infrastructure’’ broadly and consider the description provided in paragraph (c) of this section as illustrative and not exhaustive. However, OMB then directs agencies to consider certain criteria when determining if a particular project constitutes ‘‘infrastructure.’’ These include whether the project will serve a public function, including whether the project is publicly owned and operated, privately operated on behalf of the public, or is a place of public accommodation, as opposed to a project that is privately owned and not open to the public. Waivers and Exemptions A Federal awarding agency may issue a waiver to the application of the Buy America Preference. The agency notes three types of waivers: Public Interest Waiver: May be applied if the Buy America Preference would be inconsistent with the public interest. Nonavailability Waiver: May be applied if types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality Unreasonable Cost Waiver: May be applied if the inclusion of iron, steel, manufactured products, or construction materials produced in the United States will increase the cost of the overall project by more than 25 percent Before issuing a waiver, the Federal awarding agency must receive a written request from a non-Federal entity to waive the application of the Buy America Preference. The awarding agency must then “prepare a detailed written explanation,” make the waiver and explanation publicly available, allow a minimum 15-day public comment period, and then submit to OMB for final review. The guidance exempts awards expenditures for financial assistance made in anticipation of or response to an event or events that qualify as an ‘‘emergency’’ or ‘‘major disaster.” Public Comment Period OMB has provided only 30 days to comment on the new standard.  NAHB will submit comments as we believe that, under OMB’s proposal as written, virtually all housing development could be excluded from the standard. We have strongly urged HUD to exempt single-family and multifamily affordable housing projects from BABA mandates. However, NAHB remains concerned that the “built in America” standards may stall road and utility projects funded by CDBG or HOME that are needed to allow housing development to take place. Related ‹ Housing Affordability Hits Record Low but Turning Point Lies AheadTags: baba, bipartisan infrastructure law, brass, build america buy america, Building Materials, cement, concrete, copper, drywall, fiber optic cable, glass, inflation, infrastructure investment and jobs act, iron, lumber, materials shortage, millwork, nickel, producer prices, pvc, shortage, softwood lumber, steel, tin, windows

OMB Proposes Standards on Building Materials Made in America2023-02-10T12:23:37-06:00

Property Taxes by State – 2021


Real estate taxes vary widely across states both in terms of annual taxes paid as well as effective tax rates. In 2021, the difference between average real estate taxes (RETs) paid by New Jersey and Alabama home owners was $8,336. New Jersey continued its perennial distinction as having the highest average real estate tax bill per home owner ($9,151) as well as the highest effective tax rate (2.02%). Hawaii (0.28%) and Alabama ($815) were at the other end of the spectrum, boasting the lowest average effective tax rate and annual real estate tax bill, respectively. The difference between the highest-taxed state (New Jersey) and lowest (Alabama) grew by $362 between 2019 and 2021, more than double the growth between 2017 and 2019 ($170). The overall distribution has remained roughly unchanged since 2019, as the composition of the top ten remained the same except Washington replaced Texas as the state with the 10th-highest average real estate tax bills. The map below illustrates the concentration of high average property tax bills in the Northeast. In contrast, southern states (excluding Texas) boast some of the lowest real estate tax bills for their resident homeowners. As property values vary widely by state, controlling for this variable produces a more instructive state-by-state comparison. In keeping with prior analyses, NAHB calculates this by dividing aggregate real estate taxes paid by the aggregate value of owner-occupied housing units within a state. The effective tax rate can be expressed either as a percentage of home value or as a dollar amount levied per $1,000 of this value. The map below shows that New Jersey has the dubious distinction of imposing the highest effective property tax rate—2.02% or $20.22 per $1,000 of home value. Hawaii levies the lowest effective rate in the nation—0.28%, or $2.82 per $1,000 of value. However, this low rate combined with extremely high home values results in middle-of-the-pack per-homeowner property tax bills. Hawaii’s average owner-occupied home value ($822,187) is second only to California’s ($831,859) and is 61% higher than New York’s ($509,768). Interstate differences among home values explain some, but not all, of the variance in real estate tax bills across the country. Texas is an illustrative example of a state in which home values hardly, if at all, explain real estate tax bills faced by homeowners. While Texas ranks in the bottom half of states in terms of average home values, it is 11th in average real estate taxes paid. Other factors are clearly at play, and state and local government financing turns out to be a major one. Property taxes accounted for 36.2% of state and local tax receipts in 2021 after making up 39.9% of the total in 2020 due to a broad decline in income tax revenue as a result of the pandemic. However, some state and local governments rely more heavily on property taxes as a source of revenue than others. Texas serves as an excellent example once again. Unlike most states, Texas does not impose a state income tax on its residents.  Even though per capita government spending is tame compared with other states—14th-lowest in the country—Texas and its localities must still find a way to fund spending.  Local governments accomplish this by levying the sixth-highest average effective property tax rate (1.50%) in the country.  The state government partly makes up for foregone individual income tax revenue by imposing its corporate tax on revenue rather than income. Of course, neither home values nor a state’s reliance on property tax revenue is fully responsible for the geographic variance of property tax rates and revenues.  State spending per resident, the nature of this government spending, the prevalence of homeownership within a state, and demographics all affect tax policy and, thus, the type and magnitude of tax collections. These variables combine to explain the variance that the two factors discussed here do not fully capture. Related ‹ Downshift for the FedTags: Building Materials, cost of homeownership, effective tax rates, inflation, local government, property tax, property tax rates, property taxes, real estate taxes, residential real estate, state and local government, state and local taxes, taxes

Property Taxes by State – 20212022-12-15T08:23:06-06:00

How Lumber Prices are Affecting Homebuilders


They say a picture can tell a thousand words. Well, this new visual representation of the impact of lumber pricing on homebuilders certainly fits. Published on May 8th by Visual Capitalist, the amazing infographic shows the impact of lumber

How Lumber Prices are Affecting Homebuilders2021-05-13T12:28:42-05:00

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