New Homes: Could Falling Costs Offset Higher Rates?

CHICAGO – The National Association of Home Builders (NAHB) speculates that price increases in construction materials will cool down as housing demand slows amid climbing interest rates.

It cites the “mercurial fall” in framing lumber prices as a possible sign, although NAHB chief economist Robert Dietz says broader and more significant price drops for building materials cannot wholly rely on rising interest rates.

“While the [U.S. Federal Reserve] can cool the demand-side of the economy [reducing inflation and growth], additional output on the supply-side is required in order to tame the growth in costs that we see in housing and other sectors of the economy,” he says.

However, indicators don’t signal a price drop in the cost of other residential materials. Procopio Companies CEO Michael Procopio expects continued long-term appreciation, with drywall, steel, concrete and trusses still on the rise.

“It’s likely that with the current housing shortage, continued demand for materials, inflation and supply-chain issues, we will not see a substantial decrease in pricing, if any, in the coming weeks and months,” Procopio says.

Meanwhile, BrightView Landscape Development President Tom Donnelly says sitework-related inputs like asphalt and concrete prices aren’t softening, with a minimum 8% to 10% year-over-year increase in PVC pipe and related components pricing anticipated.

Northwind Group founder Ran Eliasaf says price falls in lumber and certain other materials are offset by record hikes for cement and concrete product manufacturing, steel and aluminum.

“Ultimately, the best way to mitigate the effects of rising material prices long term is to put an increased emphasis on domestic manufacturing and production,” he concludes.

Source: GlobeSt.com (06/28/22) Bergeron, Paul

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