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Rapidly Rising Building Materials and Freight Prices Push Construction Costs Higher

According to NAHB

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The prices of goods used in residential construction climbed 1.8% in May (not seasonally adjusted) and have increased 19.4%, year-over-year, according to the latest Producer Price Index (PPI) report. Prices have surged 40.4% since January 2020.  Building materials (i.e., goods inputs to residential construction, less energy) prices have increased 5.4%, year-to-date, and are 36.3% higher than they were in May 2021.

The price index of services inputs to residential construction was driven 0.4% lower in May by decreases in the building materials retail and wholesale trade indices. The services PPI is 8.3% higher than it was 12 months prior and 42.9% higher than its pre-pandemic level.

Gypsum Products

The PPI for gypsum products jumped 7.1% in May and has soared 22.6% over the past year. After a quiet 2020, the price of gypsum products climbed 23.0% in 2021 and is up 7.5% through the first five months of 2022.


The PPIs for exterior and interior architectural coatings (i.e., paint) increased 1.7% and 0.2%, respectively, in May and have not declined since January 2021.  The price of exterior paint has risen nearly 50% in the months since, including 14.5% through the first five months in 2022.

Ready-Mix Concrete

The PPI for ready-mix concrete (RMC) gained 0.9% in May and has climbed 3.2%, year-to-date.  The index for RMC has increased 9.5% over the past 12 months and 12.0% since January 2021.

Price changes were broad based geographically with increases in the South (+1.3%), Midwest (+1.5%), Northeast (+2.6%), and West (+3.0%). Although prices are higher than pre-pandemic levels in all regions, the variance of increases across regions is quite large, ranging from 4.6% in the Midwest to 23.7% in the West.

Transportation of Freight

The price of truck transportation of freight increased 2.9% in May and has climbed 25.8%, year-over-year. Long-distance and local motor carrying prices are up 28.2% and 18.4%, respectively, over that period.

Water transportation costs have jumped 21.5% over just the past two months and have increased 35.7% over the past 12 months. Deep sea (i.e., ocean) transportation of freight prices have accounted for the majority of those increases as the category accounts for over half of the water transportation PPI. The price of ocean freight transport has climbed 31.2% since March and 63.2% since the start of 2021.

Prices of rail transportation services for freight gained 2.7% in May and have increased 11.7% and 15.4% since May and January of 2021, respectively.

Steel Products

Steel mill products prices rose 10.7% in May, the second straight monthly increase following three consecutive decreases to start 2022. Although prices are 4.9% below their all-time high (reached in December 2021), they remain 105.6% higher than the January 2021 level.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) increased 0.4% in May after declining 15.6% in April. According to Random Lengths data, the “mill price” of framing lumber has fallen more than 35% since mid-May.

The PPI of most durable goods for a given month is largely based on prices paid for goods shipped, not ordered, in the survey month. Combined with survey timing issues, this can result in lags relative to cash market prices, suggesting a large decrease in the softwood lumber producer price index may be reflected in next month’s release.


Other Building Materials

The chart below shows the 12-month and year-to-date price changes of other price indices relevant to the residential construction industry.

Building Materials Wholesaling and Retailing

The producer price indices for building materials wholesaling and retailing decreased 0.6% and 2.1%, respectively, the second consecutive monthly decline for each. The wholesale and retail services indices measure changes in the nominal gross margins for goods sold by retailers and wholesalers. Gross profit margins of wholesalers, in dollar terms, have increased 26.3% over the past year while those of building materials retailers rose 3.9%. Compared to pre-pandemic levels, however, retailers’ margins are 64.2% higher and margins of wholesalers are up 36.1%.

Building materials wholesale and retail indexes account for roughly two-thirds of the PPI for “inputs to residential construction, services.”

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