ECONOMISTS AT THE NAHB EXPECTED TO SEE a cooling off in material prices by this point in 2005, but rising oil costs, competition for shipping, and other forces continue to drive prices higher, especially for critical commodities such as steel, lumber, and cement.
Ask builders which material is causing them the most headaches, however, and they're likely to name concrete (which requires cement). Although concrete typically amounts to only about 4 percent of the material cost of a new home, shortages are affecting production schedules in 35 states. This problem is especially acute for smaller builders.
Bob Heath, vice president of marketing for Cultured Stone of Toledo, Ohio, notes that his company has had to plan far in advance to maintain an adequate supply of cement.
Ryan Puckett, with the Portland Cement Association (PCA) in Skokie, Ill., says that supplies are likely to remain tight for “an indeterminable” time in hard-hit states.
“Until residential construction slows, supplies will likely be tight,” he says.
That may not cheer builders, but the cement industry is taking action, says Puckett. The latest PCA newsletter notes that “cement producers have announced 14 major expansions to domestic capacity during the 2005–2010 time period.” They expect to increase domestic capacity by 17 percent over 2004 levels.