Materials prices still climbing

Prices for construction materials continue to rise both locally and nationally.

According to the latest data from Associated Builders & Contractors Inc., construction materials prices rose 0.9 percent in May, following a 1.4 percent hike in April. The ABC report cites the U.S. Labor Department’s June 14 producer price index report, which shows materials prices are 7.5 percent higher than a year ago.

The local building industry isn’t immune from rising materials costs.

“Prices have increased across the board anywhere from 2 percent to 25 percent,” said Matt Bailey, owner of The Bailey Co., which builds residential and commercial projects.

According the report, prices for several materials have increased, including:

• asphalt coatings and felts, which rose 3.4 percent in May and are up 2 percent for the year;
• prepared asphalt, which rose 2.7 percent for May and are up 0.5 percent from May 2010;
• steel mill prices, which rose 1.1 percent in May and are 10.1 percent higher than a year ago;
• fabricated ferrous wires, which rose 0.6 percent for the month and are up 6.5 percent on an annual basis; and
• plumbing fixtures and fittings, which cost 0.6 percent more in May and 2.6 percent more than in May 2010.

The report also showed that iron and steel prices were up slightly – 0.2 percent – for the month, but they remain 9.1 percent higher than in May 2010 on a seasonally adjusted basis.

Bailey, who also is president of the Home Builders Association of Greater Springfield, said he had noticed sharp increases in roofing prices as well as in certain metals and lighting fixtures.

“Roofing prices have gone through the roof, no pun intended,” said Jeff Fahrlander, who owns Fahrlander Custom Homes as well as Castlerock Roofing.

While roofing shingles were about $70 a square about six months ago, they are now almost $100 a square, which is typically enough to cover 100 square feet.

“If I can pass that increase on to the homeowner, I do, but I absorb as much of it as I can,” Fahrlander said.

Often, Farhlander will have a roof under contract at a certain price, but materials costs will increase between the time the contract is set and the materials are purchased.

“It hurts my bottom line,” he said.

Fluctuating materials prices makes it difficult for builders to accurately price new construction bids, Bailey said.

“Some suppliers are only able to hold pricing 15 days,” he said. “If the customer is waiting a month or two or three to make a final decision on building something, that makes it tough.”

ABC Chief Economist Anirban Basu said a couple of key factors are driving up construction materials prices. The first is increasing demand for materials from emerging regions, namely China, India and Brazil.

Secondly, because of sovereign debt issues, investors have been moving from traditional stocks and bonds to globally traded commodities, Basu said. Those commodities include metals such as copper and steel commonly used in the building trades.

His concern is that the price increases are coming at a less-than-ideal time.

“Materials prices have continued to rise even as we lack a solid recovery in the construction industry,” Basu said. “This postpones the construction recovery, especially in nonresidential.”

According to www.springfieldmo.gov, the city of Springfield had issued 479 building permits through June, down slightly from 512 for the same period in 2010. Bailey said his company is building several multifamily projects and working on renovations for a Save-A-Lot grocery store in north Springfield for Ozarks Value Food Stores Inc. While Bailey said builders may be seeing more jobs than they have in recent years, Basu predicts that genuine nationwide improvement for the construction industry isn’t likely in the cards until 2012.

“What is needed is significant rebound in privately funded projects,” he said. “What is needed is an economy that is strong and creating jobs – at least 150,000 per month, and that is not happening as of now.

Basu said there is some hope, however, that materials prices may stabilize.

“There is some evidence China and India are beginning to slow economically; therefore, U.S. contractors may see some relief.”[[In-content Ad]]