The cost of inputs for new residential construction—excluding capital, labor, and imports—remained stable in November, according to the National Association of Home Builders' analysis of the the U.S. Census Bureau's latest Producer Price Index (PPI) report. Compared with the previous year, these input costs increased by 0.7% in November, following a 0.3% rise in October. The index comprises goods and services: goods prices rose 1.2% over the year, while service prices fell 0.3%.
Goods, which make up 60% of the residential construction inputs index, remained unchanged in price from October to November. This category is further divided into energy inputs and non-energy goods. Building materials, representing 93% of the goods index, saw a 2.3% annual price increase in November, slightly higher than October's 2% increase and the largest rise since June 2023. Meanwhile, energy input prices dropped 10.9% year-over-year, marking their fourth consecutive annual decline.
Among lumber and wood products, the commodities with the highest importance to new residential construction were general millwork, prefabricated structural members, softwood veneer/plywood, softwood lumber (not edge worked) and hardwood veneer/plywood. The input commodity in residential construction that had the highest year-over-year percent change (across all input goods) in November was softwood lumber (not edge worked), which was 13.7% higher than November 2023. This is of particular note because none of the other top wood commodities had a year-over-year change above 3% in November. Lumber supplies have been driving prices higher over the past month as the sawmill industry continues to adjust to the mill closures that occurred earlier this year. Higher lumber demand as residential construction rebounds due to lower interest rates is likely to continue to increase lumber prices. Read more