Tri Pointe Homes CEO Doug Bauer comments on the fall in new home sales across the country.
High aluminum prices are the latest concern for a construction industry that has suffered higher material and labor costs as the US economy emerges from the pandemic
The three-month bid price for aluminum traded on the London Metal Exchange has risen 47% this year, to $ 2,907 per tonne. Prices have risen 73% from pre-pandemic levels.
“Aluminum is an integral part of residential construction and is used to make everything from siding and gutters to insulation, nails and air conditioning equipment,” said the CEO of the National Association of Builders of housing, Jerry Howard. Aluminum is also used in roofs, fences and many other products.
Source: London Metals Exchange
Higher aluminum prices “have translated into higher material costs for builders, as the price of building materials made of aluminum has risen by 15-25% during this period,” he added.
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Higher aluminum costs are not the only headache for home builders.
Wood prices earlier this year had risen to 316% since early 2020, which added $ 36,000 to the cost of building a new mid-sized house.
Other essential materials, including iron, copper, steel and natural gas, have also seen their prices soar.
But they don’t just increase material costs.
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Builders and contractors also face higher transportation and labor costs. In addition, there are not enough roofers, glaziers, plumbers, electricians and other types of workers to meet the needs of the construction industry.
“All of this is pushing in the same direction and causing a rise in project prices,” said Anirban Basu, chief economist at builders and associate contractors. “Some project owners say,‘ There’s no more for me, I’m done. I’m not going to follow this project right now. “
A report from Builders and Associated Contractors released on Tuesday said its Construction Delay Indicator fell to 7.7 months in August, a fall of 0.8 months from July. The reading was 0.3 months below the previous year’s level.
The drop in confidence reflects a decline in the sentiment of home builders that was reported last month. The housing market index of the National Association of Home Builders / Wells Fargo fell 5 points in August, to 75, the lowest since July 2020.
However, the ABC’s confidence building index showed that sales readings, profit margins and staffing levels remained above 50, indicating growth expectations over the next six months. .
“The cure for high prices is high prices,” Basu said.
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“These high prices of aluminum, copper, steel and other inputs to production are inducing companies to increase supply in the short term,” he added. “Therefore, it should be the case that at some point in 2022 we see some relief for the construction industry and other segments of the economy producing goods.“