Despite Exemptions and Delays, Tariffs are Already Affecting Builders

2025-04-15T10:17:36-05:00

Home builders have already started to feel the effects of U.S. tariff policy, according to recent NAHB member surveys. This is true even though the Administration did not announce its list of reciprocal tariffs until April 2nd, lumber along with USMCA-compliant imports from Canada and Mexico were exempt, and a week later the Administration enacted a 90-day hiatus, with tariffs on countries other China limited to 10% over this time. The Administration subsequently granted further temporary exemptions from the reciprocal tariffs for a broad range of electronic products imported from China.   After all this, significant uncertainty about the final outcome still remains. The U.S. may revisit trade policy for Canada and Mexico, China-U.S. negotiations are unsettled, and the effects of the 10% tariff on building products from other countries are difficult to predict. Moreover, exactly what will happen at the end of the 90-day hiatus remains unclear. In the meantime, economic uncertainty can adversely affect consumer confidence and make prospective home buyers hesitate. This is one of the reasons the NAHB/Wells Fargo Housing Market Index (HMI) declined in March. The latest NAHB estimate  (based on cost data from RSMeans and PPI inflation rates) is that the average new single-family home requires $174,155 worth of building materials. Previous NAHB research has shown that 7.3% of materials in residential construction, or $12,713 of materials costs for the average single-family home, is imported. Based on this, it may seem that tariffs would have a limited effect on home builders. However, as noted above, the uncertainty caused by the mere announcement of tariffs can have an adverse effect on the behavior consumers and even businesses. In recent surveys, NAHB builders and remodelers reported that building material suppliers had already increased their prices—by an average of 5.5% and 6.9%, respectively—due to announced, enacted or anticipated tariffs. The data on builders came from the HMI survey and were collected during the first two weeks of March. The data on remodelers came from the survey for the NAHB/Westlake Royal Remodeling Market Index and were collected during the last week of March and first three days of April. NAHB will  continue to monitor material prices given the uncertainty and fluidity of the tariff situation.  Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Despite Exemptions and Delays, Tariffs are Already Affecting Builders2025-04-15T10:17:36-05:00

Building Material Prices Continue to Grow at Slower Pace

2025-04-11T11:24:31-05:00

Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were up 0.6% in March according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. The increase in February was revised upward to 0.7%. The Producer Price Index measures prices that domestic producers receive for their goods and services; this differs from the Consumer Price Index which measures what consumers pay and includes both domestic products as well as imports. The inputs to the New Residential Construction Price Index grew 1.3% from March of last year. The index can be broken into two components—the goods component also increased 1.3% over the year, with services increasing 1.3% as well. For comparison, the total final demand index, which measures all goods and services across the economy, increased 2.7% over the year, with final demand with respect to goods up 0.9% and final demand for services up 3.6% over the year. Input Goods The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. For the month, the price of input goods to new residential construction was up 0.5% in March. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index. Energy input prices fell 3.9% between February and March and were 14.9% lower than one year ago. Building material prices were up 0.8% between February and March and up 2.7% compared to one year ago. Energy costs have continued to fall on a year-over-year basis, as this marks the eighth consecutive month of lower input energy costs. Metal products used in residential construction saw the largest price increases in the month of March. Across all inputs to new residential construction, ornamental and architectural metal work increased the most, up 21.0%. Ornamental and architectural metal work products increased 11.2% on a month-to-month basis, by far their largest monthly increase for the product, with the next closes being 7.9% back in October of 2021. Input Services While prices of inputs to residential construction for services were down 0.1% over the year, they were up 1.1% in March from February. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component (other services). The most significant component is trade services (around 60%), followed by other services (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was up 0.7% from a year ago. The other services component was up 1.6% over the year. Lastly, prices for transportation and warehousing services advanced 3.6% compared to March last year. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Building Material Prices Continue to Grow at Slower Pace2025-04-11T11:24:31-05:00

U.S. Sawmill Production Capacity Constant in 2024

2025-03-19T10:18:35-05:00

Sawmill and wood preservation firms reported lower capacity utilization rates coupled with level production and capacity throughout 2024. Despite no growth in production in 2024, utilization rates have trended downwards since 2017 as sawmills have expanded production capability. Even with more production capability, real output has not followed as output remains lower than 2018. Capacity utilization rates are a ratio of actual production and potential production capabilities for firms. The utilization rate for sawmills and wood preservations firms was 64.7% in the fourth quarter on a four-quarter moving average basis. As utilization rates have shifted lower, the gap between full production capability and actual production has grown. Actual production is typically lower than full capability due to multiple factors ranging from insufficient materials and orders to lack of labor. By combining the Federal Reserve’s production index and the Census Bureau’s utilization rate, we can compose a rough index estimate of what the current production capacity is for U.S. sawmills and wood preservation firms. Shown below is a quarterly estimate of the production capacity index. This capacity index measures the real output if all firms were operating at their full capacity. Based on the data above, sawmill production capacity has increased from 2015 but remains lower than peak levels in 2011. Most of the recent capacity gains took place between 2023 and 2024, followed by little gain over the course of 2024. As evident above, there is ample room to increase production of domestic lumber, but current production levels remain much unchanged over the past several years. Employment is an important factor for ensuring firms reach their full capacity. For sawmill and wood preservation firms, the number of employees declined to its lowest level since 2021, reporting an average of just over 89,000 employees across the industry in the fourth quarter. Employment declines, likely due to a weak lumber market in 2024, help explain why utilization rates have fallen. With fewer workers, it is less likely that a firm can increase production to its full capability. Imports Since U.S. firms do not produce at their full potential, imports help to supplement domestic supply, especially in the softwood lumber market. According to Census international trade data, existing tariffs on Canadian softwood lumber have not reduced the need for imports to meet domestic consumption but have made the U.S. more reliant on non-North American lumber, resulting in unnecessarily complex supply chains. The current AD/CVD Canadian softwood lumber tariff rate stands at 14.5% and is expected to double under the administrative review process by the Department of Commerce. Potential tariffs on lumber, such as the ongoing 232 investigation and 25% on all Canadian goods, could push tariffs rates on Canadian softwood lumber above 50% later this year. Higher tariffs on softwood lumber mean higher costs for builders who use lumber as a key input to construction. Given the current housing unaffordability crisis, any additional costs will continue push homeownership and affordable housing further out of reach for households in the U.S. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

U.S. Sawmill Production Capacity Constant in 20242025-03-19T10:18:35-05:00

Softwood Lumber Prices Continue to Lead Price Growth for Building Materials

2025-03-13T11:20:23-05:00

Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were up 0.5% in February according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. The increase in January was revised downward to 1.1%. The Producer Price Index measures prices that domestic producers receive for their goods and services, this differs from the Consumer Price Index which measures what consumers pay and includes both domestic products as well as imports. The inputs to the New Residential Construction Price Index grew 0.7% from February of last year. The index can be broken into two components—the goods component increased 1.2% over the year, while services decreased 0.1%. For comparison, the total final demand index, which measures all goods and services across the economy, increased 3.2% over the year, with final demand with respect to goods up 1.7% and final demand for services up 3.9% over the year. Input Goods The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. For the month, the price of input goods to new residential construction was up 0.6% in February. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index. Energy input prices grew 2.6% between January and February but remained 8.5% lower compared to one year ago. Building material prices were up 0.5% between January and February while they were up 2.0% compared to one year ago. Among materials used in residential construction, lumber and wood products ranks 3rd in terms of importance for the Inputs to New Residential Construction Index. Nonmetallic mineral products and metal products rank 1st and 2nd, respectively. The top lumber and wood products include general millwork, prefabricated structural members, not-edge worked softwood lumber, softwood veneer/plywood and hardwood veneer/plywood. Prices for these wood commodities experienced little growth for most of 2024. Currently, softwood lumber prices were 11.7% higher compared to one year ago while on a monthly basis, prices rose 3.0%. This marks the fourth straight month where yearly price growth was above 10% for softwood lumber. Input Services While prices of inputs to residential construction for services were down 0.1% over the year, they were up 0.4% in February from January. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component. The most significant component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was down 1.5% from a year ago. The services less trade, transportation and warehousing component was up 1.6% over the year.  Lastly, prices for transportation and warehousing services advanced 2.2% compared to February last year. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Softwood Lumber Prices Continue to Lead Price Growth for Building Materials2025-03-13T11:20:23-05:00

Residential Construction Input Prices Increase to Start the Year

2025-02-13T11:17:12-06:00

Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were up 1.2% in January according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. The Producer Price Index measures prices that domestic producers receive for their goods and services, this differs from the Consumer Price Index which measures what consumers pay and includes both domestic products as well as imports. The inputs to the New Residential Construction Price Index grew 1.1% from January of last year. The index can be broken into two components—the goods component increased 2.1% over the year, while services decreased 0.3%. For comparison, the total final demand index, which measures all goods and services across the economy, increased 3.5% over the year, with final demand with respect to goods up 2.3% and final demand for services up 4.1% over the year. Input Goods The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. For the month, the price of input goods to new residential construction was up 1.6% in January. Monthly growth of the index was relatively low in the past two years, as this monthly increase was the largest since March of 2022 (3.3%). The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index. The 2.1% yearly growth in the goods component can be attributed to the rise in the prices of building materials, which grew 2.3% over the year. Meanwhile, the price of energy inputs was 1.6% lower than last year. Between December and January, building materials increased 1.4%, while energy inputs increased 4.3%. At the individual commodity level, the five commodities with the highest importance for building materials to the New Residential Construction Index were as follows: ready-mix concrete, general millwork, paving mixtures/blocks, sheet metal products, and wood office furniture/store fixtures. Compared to last year, ready-mix concrete was up 4.1%, wood office furniture/store fixtures up 4.7%, general millwork up 2.4%, paving mixtures/blocks up 8.6% while sheet metal products were up 0.4%. For January, the commodity used in new residential construction that featured the highest price growth was an energy input, home heating oil and distillates, increasing 16.0%. The non-energy input that had the highest monthly price growth was paving mixtures and blocks, up 14.8%. This is likely a pass-through of increases in asphalt prices, which were up 6.9% in January. Input Services While prices of inputs to residential construction for services were down 0.3% over the year, they were up 0.5% in January from December. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component. The most significant component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was down 1.9% from a year ago. The services less trade, transportation and warehousing component was up 1.6% over the year.   Lastly, prices for transportation and warehousing services advanced 3.1% compared to January last year, the largest year-over-year increase since January of 2023. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Residential Construction Input Prices Increase to Start the Year2025-02-13T11:17:12-06:00

Residential Construction Inputs Price Growth Slows in 2024

2025-01-14T11:19:38-06:00

Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were unchanged in December according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. This index grew 0.8% over 2024, the lowest yearly increase in the index since its inception in 2014. The inputs to the new residential construction price index can be broken into two components—one for goods and another for services. The goods component increased 1.7% over the year, while services decreased 0.4%. For comparison, the total final demand index increased 3.3% in 2024, with final demand with respect to goods up 1.8% and final demand for services up 4.0% over the year. Input Goods The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. The price of input goods to new residential construction was down 0.1% in December from November. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index. The price of goods used in residential construction grew 1.7% in 2024, slightly higher than the growth in 2023 of 1.0%. This growth can be attributed to the rise in the prices of building materials, which grew 2.2% in 2024. The price of energy inputs fell for the second straight year, down 5.3% in 2024. At the individual commodity level, the five commodities with the highest importance for building materials to the new residential construction index were as follows: ready-mix concrete, general millwork, paving mixtures/blocks, sheet metal products, and wood office furniture/store fixtures. Across these commodities, there was price growth for most commodities in 2024 except for sheet metal products. Ready-mix concrete was up 5.1%, wood office furniture/store fixtures up 4.3%, general millwork up 2.5%, paving mixtures/blocks up 2.3% while sheet metal products were down 0.2%. The commodity used in new residential construction the featured the highest price growth in 2024 was softwood lumber, not edge worked, which increased 14.7% in 2024. The commodity where prices declined the most was No. 2 diesel fuel, down 13.9%. Input Services Prices of inputs to residential construction for services were up 0.5% in December from November. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component. The most significant component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was down 1.8% in 2024 after growing 5.8% in 2023.  Across individual services, credit deposit services advanced the most in 2024, up 21.2% over the year while the prices for metal, mineral and ore wholesaling services fell the most, down 19.2%. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Residential Construction Inputs Price Growth Slows in 20242025-01-14T11:19:38-06:00

How Lumber Prices are Affecting Homebuilders

2021-05-13T12:28:42-05:00

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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