Prices for products such as lumber and drywall rose almost by the day during the construction boom. After the economy crashed and construction demand fell to a drip, prices routinely dropped in line with weakening demand. Construction surely hasn’t recovered and might be just above bottom but, contractors are seeing the cost of building products heading up again.
Prices for building materials have just as much to do with local demand as they do with the speed of development in fast-moving economies such as Brazil, China and India. Overall, construction prices dipped in November by 0.1 percent but are up 6.2 percent over last year, according to a report by Associated Builders and Contractors, citing government data.
However, concrete and electrical wiring components are some of the products suppliers have said could rise 5 percent to 10 percent in 2012. Monthly steel prices have declined, though steel is still up 11.2 percent over November 2010, Petroleum, which affects the price of transporting commodities, is up 19.3 percent over a year ago.
The cost of labor is also is a wild card. There’s less competition, because contractors and sub-contractors who had bid for work at unsustainably low prices are now out of business. The remaining companies can charge higher rates. The costs of health care and other types of insurance also are rising.
The Construction Boom saw double-digit price inflation for supplies and labor. That balloon was deflated in the recession. The question is, where are we going from here?