Construction Costs Rising

Saturday, October 29, 2005 | 10:20 AM

We have had robust reflation/inflation ever since the Fed took rates down to half century lows, and then left them there for quite a while. Each time I mention this, some dang fool insists its just energy, depsite the evidence that food, commodities, precious metals, heath care insurance, industrial metals, medical care, housing costs, education, etc. are all higher in price than they were.

Today, we add yet another category of goods that hve been going up in price:  construction materials.

Ken Simonson, chief economist for The Associated General Contractors of America, issued an analysis this week that compared construction costs over a four-year period from 2001 to 2005 . . .

By September of 2004, steel and copper construction products had soared as much as 62 percent higher than a year earlier.

Overall, construction material cost climbed about 11 percent in the 12 months ended this past September.

What's on the construction list price increases?

Gypsum products were up 21 percent;
asphalt had climbed 12 percent;
insulation materials rose 11 percent;
lumber up 12 percent;
steel and copper construction products up 62  percent;
PVC plastic up "almost" 100%;
gypsum -- double-digit increase;
concrete prices: plus seven percent from 9/03 - 9/04; more than 12% 9/04 - 9/05;
Diesel fuel up more than 50 percent;
Cement: rising prices and spot shortages;

The diesel expenses "hit contractors hard. Not only did they have to pay more to run their own trucks, bulldozers, backhoes, and generators, they also had to pay more for fuel-thirsty materials such as concrete, which burns considerable energy while being mixed and transported in heavy loads to sites."

The only bright spots:  Lumber, which thanks to hurricane-downed trees is abundant (and relatively cheap) -- and labor, whose costs have risen less than 3%


Source:

Construction costs building steam
Contractors' group says prices for concrete and other materials have soared the past two years.

Les Christie
October 27, 2005: 2:03 PM EDT, CNN/Money staff writer
http://money.cnn.com/2005/10/27/news/construction_costs_soar/index.htm

Saturday, October 29, 2005 | 10:20 AM | Permalink | Comments (10) | TrackBack (0)
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Comments

two points: (1) Housing Bubble and (2) Inflation

(1) Bubble: ...some have said, me included, that the run-up in construction costs (thx to the sister storms and the housing boom) will be the primary factor that will 'break the back' of the housing bull run...

and if you dont believe the surge in construction costs will do it alone, consider the perfect storm of: development cost increases + interest rate increases + slowing economy = deflating housing bubble.

(2) Inflation: Barrys right - we will see inflation pick up in 2006 beyond what is in 'core' today. And beyond? IMHO, pending energy price changes, inflation should slow to a crawl in 2007 via to housing deflation, rate hikes, bear market and economic slowdown.

Posted by: andre Haroche | Oct 29, 2005 11:24:56 AM

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