Construction Costs: It is Not Getting Any Cheaper

We’ve seen prices of materials creeping up fairly steadily for the past year, and according to the Associated General Contractors of America (AGC), the era of cheap construction materials may be slipping away.

The price index for construction costs input — a weighted average of all materials used in construction, plus items consumed by contractors, such as diesel fuel and tires on equipment — rose 0.4 percent from December to January and 4.5 percent during the last year, according to Ken Simonson, chief economist for AGC.

The 4.5 percent increase was relatively small, Simonson said, but the cost of construction materials could accelerate in the months to come.

“Unfortunately, this slowdown has already ended for some key materials,” Simonson said in a statement. “Crude oil and diesel prices have moved up significantly since the January price index data were collected.”

Throughout the country, any business which supplies, or manufacturers building products is feeling the grip from the negative market conditions which is inflating the construction costs of everything from roofing shingles to building supplies.

These conditions include oil prices over $100 per barrel, a weak U.S. dollar American companies must use to purchase commodities which, in many cases, are traded worldwide; a stagnant building construction industry; and, severe weather around our country that has left over one million American homes with storm damage, causing the diversion of more building and roofing materials to the repair and remodeling of homes.

A recent report, which measures inflation, had a jump of 6.1 percent year-to-year for asphalt roofing and 10.2 percent for steel. Those numbers might be just the beginning of a wave of construction cost increases which contractors are already expecting.

Price increases though, haven’t affected every commodity….yet. Prices for lumber have remained fairly steady. The widening price spread between steel and lumber products is leading more General contractors to build using lumber framework.

Builders and suppliers are not in the greatest of bargaining positions right now, and passing along price increases to buyers isn’t tenable. With oil prices sky rocketing, oil is going to be diverted to the manufacturing of whatever product yields the highest profits, and building materials generally don’t fall into this category.

What does all this mean?  If you are contemplating new construction, whether it’s a garage, shop, new business or home and have the financial resources or backing, the price is not going down.  Not any time in the near future, and possibly not ever again.  As the saying goes, “there is no time like…the present

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