Rising Concrete Prices Propel Building Materials Costs

After four consecutive declines, the producer price index (PPI) for inputs to residential construction less energy (i.e., building materials) rose 0.3% in February (not seasonally adjusted) following a 1.1% increase in January (revised), according to the latest PPI report.

Price growth of goods inputs to residential construction, including energy, gained 0.4% over the month. Prices have increased 2.9% over the past 12 months.

Where are Prices Rising the Most?

Ready-mix concrete (RMC) prices continued their historic pace as the index increased 0.8% in February after gaining 0.7% in January (revised). RMC prices have increased in all but two months since January 2021. The monthly increase in the national data was broad-based geographically but was primarily driven by a 4.2% increase in the Northeast. Prices rose 0.8% in the West and 0.5% in the South, and were unchanged in the Midwest.

Factors Driving the Increase in Concrete Product Prices

The months-long concrete price increases are partially due to the closure of a large limestone quarry in Mexico. And the concrete shortage isn’t limited to the United States — it’s a global shortage being driven by the dearth of one of concrete’s main ingredients: cement mix. This has resulted in price increases across the board, and there does not appear to be any relief on the horizon.

Prices for Other Key Building Materials

Prices for gypsum building materials and steel mill products also rose 0.5% and 2.6%, respectively, following price declines the previous month. Gypsum products prices are 12.5% higher than they were a year ago but began stabilizing in August 2022. This was the first monthly price increase for steel mill products since May 2022, but prices have dropped 26% since then and are down 21.2% over the past 12 months.

Softwood lumber prices fell 0.8% in February — the seventh consecutive monthly decline. Since peaking in March 2022, the index has fallen by 47.1% but is still nearly 20% above the January 2020 level.

History of Concrete Prices in the Construction Industry

The cost of the basic components of concrete — cement, water, sand and aggregate — are more stable than the cost of framing lumber, for example. While lumber prices can fluctuate wildly, concrete costs have remained relatively steady in recent years, allowing for greater planning and financial forecasting.

The cost of steel mill products, some plastic piping, and softwood veneer and plywood have more than doubled since March 2020. In contrast, prices for ready-mix concrete, which makes up 10% of the overall goods used in residential construction, have not risen as dramatically and have kept the figure slightly down, as have other non-metallic and non-wood commodities.

Uses and Benefits of Concrete in Home Building

Concrete is an extremely versatile and durable material that has become an essential component of modern construction. Its applications in residential construction are vast and varied, and it is used for a wide range of purposes, from building foundations to adding the finishing touches to a home.

• Foundations: Concrete is widely used as a foundation material in construction due to its exceptional strength and ability to withstand the weight of the entire structure. Whether used for concrete slab foundations or homes with crawl spaces, concrete provides a solid base that ensures the stability and longevity of a home.
• Architectural Features: Concrete's versatility allows it to be molded into various shapes and textures, making it a popular choice for architectural features, including facades, decorative panels, and interior finishes. It can be customized to meet specific design requirements and can be made to look like other materials such as wood, stone stamped concrete, or brick.
• Reinforced Elements: When concrete is combined with materials such as steel, it forms the composite material known as reinforced concrete. This enhances concrete's tensile strength, making it suitable for a wider range of structural applications, and increases its durability and resistance to wear and tear.
• Sound Barriers: Concrete's mass effectively blocks sound, making it a common material for constructing sound barriers along highways and in buildings for soundproofing purposes. It can be designed to absorb or reflect sound waves and can be used to create a more comfortable and peaceful living environment.
• Prefabricated Components: Depending on how much concrete is needed, many elements, such as slabs, beams, stairs, and wall panels, can be precast in a factory setting and then transported to the construction site. This method speeds up construction times and can improve quality control, resulting in a more consistent and higher quality end product.
• Pavements and Roadways: Concrete is often used for driveways and roads due to its durability and ability to withstand heavy traffic. It can withstand harsh weather conditions and is resistant to abrasion and erosion.
• Flooring: Concrete flooring is prized for its longevity, ease of maintenance, and ability to be finished in various ways (polished, textured, stained) to achieve different aesthetics. It is also a popular choice for underfloor heating systems due to its excellent thermal conductivity.

In addition to these uses, concrete is a popular choice for creating patios and slabs. The installation of a concrete patio or concrete slab involves a process that includes combining the concrete mix in a concrete mixer, pouring concrete into a prepared site or concrete forms, and allowing it to cure. Once the concrete is set, it can be sealed to protect against weather and other elements.

Planning Your Concrete Project

If you are planning to install a concrete patio or slab at your next project, working with a specialized concrete contractor is advised. Concrete contractors know exactly how to tackle even the most complex concrete installation project. Working with wet concrete is a skilled trade, and a professional concrete installer will ensure the correct consistency of the concrete mix. Once the concrete cures, the professional installer will apply a concrete sealer to protect it from damage and enhance its appearance.

Concrete contractors should also be considered for many other projects on the job site, including landscaping projects, concrete removal, retaining walls, a basic concrete slab, concrete edge forms, concrete driveways and many other concrete surfaces. Always consider labor costs, delivery fees and installation timing for your projects. Concrete cost will vary significantly depending on the time of year and how many cubic yards of concrete will be used.

The information above was provided and reviewed by David Logan, former NAHB director of tax and trade policy analysis. Mr. Logan is an expert in tracking and forecasting trends of commodities, especially those typically used in construction and home building such as lumber, gypsum, steel and concrete. He provides more detail in this Eye on Housing post.