The prices of goods used in residential construction increased 1.5% in December, driven by large price increases for wood products, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. Building material prices increased 18.9% since December 2020 while the PPI for softwood lumber increased 24.4% in December. According to the NAHB’s Eye on Housing blog, softwood lumber prices have increased 44.5% since September 2021.
Record-high volatility of softwood lumber prices continues to be as problematic as high prices. The monthly change in softwood lumber prices averaged 0.3% between 1947 and 2019. In contrast, the percent change of the index has averaged 12.0% since January 2020—the highest 24-month average since data first became available 1947 and nearly triple the previous record.
In December, the PPI for gypsum products decreased 0.5%—the second consecutive monthly decline. Gypsum products prices ended the year 18.2% higher than they were in January.
The category of professional services carries the third most weight among those that make up the service inputs to residential construction PPI. The prices of legal, architectural, and engineering services changed 0.5%, 0.0%, and -0.1%, respectively, in December. Although the year-to-date increase in prices of professional services used in residential construction are quite modest compared to that of materials, prices have increased more in 2021 than they had by December 2020; the difference is especially striking for architectural services.
Though the difference in price changes for legal services is small, the percentage increases are large relative to engineering and architectural. This follows with a trend in recent years. Since December 2018, the price of legal services has risen 13.6%–much more than the three-year increase in architectural (+1.1%) and engineering services (+5.8%).
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