Building or Purchasing a Home? It's Getting Even Pricier

A confluence of disasters is giving the U.S. construction industry a strong dose of inflation.

The roots of pricier building supplies stretch from the wildfire-stricken forests of British Columbia to the hurricane-affected coasts of Texas and Florida.

Supply concerns and home-rebuilding efforts, along with U.S. duties on Canadian timber, have driven softwood lumber prices on the Chicago Mercantile Exchange to the fifth-highest peak since 1986.

For Americans whose homes were damaged by the tropical storms, bigger repair bills are in store. For those in the rest of the country, new-home prices may stay elevated as builders pass along the higher construction costs.

According to a National Association of Home Builders report earlier this week that showed developers’ confidence at a five-month high in October, construction firms are so far managing the jump in costs for everything from framing lumber to wood paneling.

“This month’s report shows that home builders are rebounding from the initial shock of the hurricanes,” NAHB Chairman Granger MacDonald, a Kerrville, Texas-based builder and developer, said in a statement. “However, builders need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages.”

Higher costs of lumber and wood products for framing and sheathing, which accounted for almost 20 percent of the price of building a home in 2015, means property owners will receive inflated bills from contractors to rebuild after hurricanes Harvey and Irma.

The increase in costs of building materials is part of a general pickup in prices paid by construction companies and other non-manufacturing businesses, as well as manufacturers. That signals faster inflation in the production pipeline. 

The Institute for Supply Management’s latest data showed greater shares of purchasing managers in manufacturing and services are reporting paying higher costs. Should those get pushed through to the consumer, price pressures could build.