SUMMARY: Inflation Batters Building Costs
|(Photo courtesy of US Gypsum)|
The year began with an explosion in steel prices that reverberated throughout construction. That was followed by aftershocks in lumber, plywood, gypsum wallboard, copper, stainless steel, insulation and concrete products. The rebound in nonresidential construction markets, strong spending on public works and record levels of home building pushed up demand for materials and prices along with it. The resulting higher materials prices propelled inflation in the construction industry from 3% at the beginning of the year to about 10% by September, according to ENRs building cost index.
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|Construction Material Price Movement in 2004|
|Gypsum Wallboard Prices|
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These tight market conditions were tested even further in the southeastern states at the end of the third quarter as a series of hurricanes shut down job sites and sent consumers scrambling for plywood (click here to see story - Deadly Hurricane Trio Whips Up New Debate). However, the storms impact on materials prices will be very local and relatively short-lived, say industry sources.
The more immediate cost associated with the recent hurricanes has been with project delays, says Jose Moreno Jr., president of BCM Construction Management, Miami. "Every time there is a hurricane warning, we have to shut down and secure our work sites, stopping work from four to five days," he says. Building costs in the Miami area are up about 10% from a year ago, Moreno adds.
In the "strike zone," suppliers are scrambling to replenish their storehouses of building materials. "For the first time in our history, we have actually called on our stores across the country," says Don Harrison, eastern division spokesman for The Home Depot, Atlanta. "This resupply mission is off the charts," he says.
Despite the demand, long-term vendor contracts are keeping supplier prices at bay. "We have a no-price-gouging policy," says Harrison. "Once a storm track is identified, prices on all commodities are locked in," he says.
"We expect market conditions [in the Southeast] to be back to normal within a few weeks," says Rusty Carroll, oriented- strand board marketing manager for Louisiana-Pacific, Nashville, Tenn. Supplies are being rerouted and the storms will have no significant long-term impact on price and availability of building products, he says.
"Years ago, hurricanes had a bigger impact on lumber and plywood prices," says Jon Anderson, publisher of Random Lengths, a Eugene, Ore.-based publication that tracks lumber and panel prices. Today, markets adjust quickly to these disruptions, he says.
Nationally, the seasonal slowdown after Labor Day had a bigger impact than the storms, says Anderson. Plywood prices fell 4% in the week after Hurricane Ivan hit...