Here’s an area of real estate that’s not often discussed: The cost of construction materials.
The Associated General Contractors of America reports that the cost of key construction materials increased in August and year-over-year, a trend that froces contractors to pay more for goods “even as competitive pressures restrain prices for finished projects,” the Virginia-based trade organization wrote recently.
A producer price index of construction materials used in most-every type of project increased 0.9 percent in August and 1 percent when compared with the same period last year.
This includes an 8.7 percent increase in diesel fuel, up 5.2 percent from August 2011. Prices for gypsum products are up 17.8 percent when compared with last year, and up 0.3 percent compared with July of this year. The index for architectural coatings, unchanged from July, has increased 11.7 percent in the past year. Lumber and plywood costs increased 2.3 percent in August and are up 6.9 percent compared with August 2011.
It’s not all doom and gloom. AGC reports that prices for copper and brass mill shapes dropped 1 percent between July and August and are down 14 percent year-over-year. The price of aluminum shapes is down 9.8 percent compared with last year. Steel prices are down 8.2 percent so far this year, as well.
"After years of depressed construction activity, the last thing contractors need is to see materials price increases further erode their already-slim margins,” remarked Stephen Sandherr, the association’s CEO.
Janet Moore covers commercial real estate.