Materials price surge wanes

The construction materials market has stabilized enough that cost estimates can again be made with reasonable confidence and the incidence of expensive expediting and paying premium prices to get materials has diminished to a near normal level. But the legacy of the 2004 price surge is 15% or higher for steel, lumber, nonferrous, and gypsum products, 40% higher for fuel, and nearly 10% for concrete.

Lumber prices have already fallen sharply, with futures market quotes suggesting another 5–10% drop from early January prices. But still-rising nonconstruction demand will boost steel prices another 5–10% in 2005. Similarly, concrete prices will gain another 5% this year.

The summary construction materials price index, including processed materials and manufactured products, jumped more than 9% over the last year, but has been declining for several months as additional supplies have entered the construction market. However, that decline is a temporary inventory adjustment. Expect the overall price index to be rising at about a 3% annual pace beginning in the late winter.