TAMPA, Fla. (WFLA) — Costs to consumers are already high. Inflation runs rampant, but it’s the businesses that are seeing bigger price fluctuations than their customers, particularly builders.
According to the latest Producer Price Index from the U.S. Bureau of Labor Statistics, prices for consumer goods and utilities like natural gas to electric utilities and for beef and veal declined.
But, with an ongoing housing crisis, the items that had price rises were the materials to build a home, and the fuel needed to transport those goods, and their builders.
The PPI showed that some price gains weren’t as high as others, but the biggest increases were in metals and oil. The petroleum price jumps are no surprise, the price of gasoline at the pump has been rising steadily for weeks.
That spells big problems for home builders and home sellers. The National Association of Home Builders’ monthly Housing Market Index for March found that confidence in the market is down, and the “traffic of prospective buyers” was 5% lower than the year before. CNBC reported builders’ sale expectations had dropped 10 points, for what they’re predicting to sell in the next six months.
“The March HMI recorded the lowest future sales expectations in the survey since June 2020,” said NAHB Chief Economist Robert Dietz. “Builders are reporting growing concerns that increasing construction costs (up 20% over the last 12 months) and expected higher interest rates connected to tightening monetary policy will price prospective home buyers out of the market. While low existing inventory and favorable demographics are supporting demand, the impact of elevated inflation and expected higher interest rates suggests caution for the second half of 2022.”
Gasoline prices rose 60.6% while crude oil or petroleum went up 66.6%, putting transportation costs at a high. Diesel prices also rose, up 57.5% compared to last year’s costs. We’ve seen that reflected for commuters and truckers going to work and making deliveries, but what is being delivered is also on the rise.
Metal products made from iron and steel, in a mill, rose 74.4%. The price of wires, like for electrical devices or inside of walls, rose 25.7%. Lumber prices rose 23.9% for hardwood and 22.2% for softwood.
“While builders continue to report solid buyer traffic numbers, helped by historically low existing home inventory and a persistent housing deficit, increasing development and construction costs have taken a toll on builder confidence,” NAHB Chairman Jerry Konter said in a release.
Following an interest rate hike by the Federal Reserve, the first one since 2018, mortgage interest rates are over 4%, adding stress to the question of affordability in the housing market, where prices are already surging and inventory is already low.
“The pandemic brought with it extreme demand for homes that has pushed prices to rise at previously unimaginable rates,” Zillow said. “Extreme demand driven by historically low interest rates and a wave of Millennial and Baby Boomer buyers depleted a housing stock that was never really replenished by new construction after the glut following the Great Recession.”
With the interest rate increased, in the first of a planned seven hikes in 2022, it appears the high demand driven by low interest rates may be over. At the same time, foreclosure starts in Florida are up, now the second highest level in the nation for February.
Tampa has issued 54,632 multifamily building permits and 118,000 for single family homes, with the metro area ranked 16th overall for number of permits issued for both single- and multifamily homes or complexes, according to StorageCafe.
In Tampa, that means already high prices may go up for now, even with an increase in approved building permits for homes. Real estate and storage company StorageCafe reports the current real estate market is the most active in the past 10 years. The company said the mass migration to Florida, and Tampa, has led to a 15% increase in population from 2012 to 2020.
NAHB reports “Extremely volatile lumber prices during the past year have caused the average price of a new single-family home to increase by more than $18,600.” The PPI showing lumber up an average of 22.6%, with hardwood more up even higher, adds to the concern of affordable building and affordable housing.