Producer price index trends for key building materials look benign.

National Association of Home Builders economist Robert Denk takes a look at the latest Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for February, staying on guard for signs of inflation creeping into what builders need to manage as they convert their backlogs of sold homes.

Everybody knows, those conversions--from orders to profitable deliveries--are the all-critical deciding factor on who's going to have more cash to reinvest into needed lot pipelines or not, so Denk's read on materials price trends is significant in how benign that front looks. Denk writes:

Softwood lumber prices trended down modestly from mid-2014 to mid-2015, but have wobbled up and down with no discernable trend since. Lumber availability is high with rising domestic production and a strong dollar drawing in imports and crimping exports. OSB prices slipped further in February adding to January’s decline. Prices are down 4.5% since December.

Gypsum prices ticked down in February after rising in January. Early year increases followed by modest declines have been the norm for the last several years. We expect prices to hover in this range in 2016.

But as for labor costs, that's the sticky wicket here.

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