FOR BIG BUILDERS, 2005 IS SHAPING UP TO be another outstanding year. The market fundamentals remain healthy, with strong consumer demand for single-family homes and condominiums, lean inventories, a favorable mortgage rate structure, and continued increases in household formations.
While these encouraging market conditions bode well for our industry, a shortage of cement and other key building materials—including wall board, lumber, steel framing, and insulation—looms as one of the largest threats to a dynamic housing market that has produced record levels of new home construction.
Rising materials prices can be tied directly to decisions affecting national trade policy. Specifically, tariffs on Mexican cement and Canadian framing lumber have distorted the marketplace by artificially inflating prices and raising costs for home buyers and businesses that rely on these fundamental building blocks. The NAHB estimates that rising wholesale prices of building materials have added $5,000 to $7,000 to the cost of building a new home. These added costs can run several millions of dollars for firms that build thousands of homes annually.
The United States imports more than 20 percent of its cement to meet domestic needs, with much of it coming from producers in Asia and Southern Europe. Surging demand in China has diverted the amount of cement available from other countries and limited the number of cargo ships that can bring the product to U.S. ports. As a result, more than half the states in the country have reported supply shortages.
It takes approximately 45 days for cement shipments to arrive at U.S. ports from Asia and Europe, compared to an average delivery time of only four days from Mexico. However, prohibitive anti-dumping duties on Mexican cement make this logical source of supplementary imports economically infeasible.
Some Florida home builders were reporting that even before this season's hurricanes battered the state, cement shortages were delaying projects and adding one month to the average amount of time it was taking to build a new home. The state has been relying on imports for about 40 percent of the cement it uses annually.
The price of framing lumber, the principal component in home construction, has also been affected by import barriers, jumping to near record levels throughout much of the summer. A steady supply of building materials available at reasonable prices is essential to maintaining a vibrant housing market and to meeting the growing demand for affordable housing.
With rebuilding efforts in Florida now in full swing, demand for cement, framing lumber, and other building materials is expected to remain strong. This means that waiting for a seasonal winter slowdown is no answer to resolving the scarcity and high price of building materials.
Washington must move quickly to rescind the costly anti-dumping duties of up to 80 percent on Mexican cement imports that have been in place since 1990 and have forced American builders to look overseas to meet their supply needs.