Behold the inevitable downside to the national housing recovery:
Higher prices for new homes — and not because of the kind of appreciation in value that we generally enjoy, but because of rising costs to build.
Robert Crout, president of the Central Oklahoma Home Builders Association, has been cautioning folks to get ready since he took office at the first of the year.
He and others from Oklahoma came back from the International Builders Show in Las Vegas in January glad to hear of recovery in much of the country, but freshly alerted to rising — in some cases, spiking — prices for the stuff that goes into building a house.
Last month, Crout said homebuilders here were feeling the squeeze because appraisers weren't factoring in the increased costs for materials. He said builders were absorbing increases, because lenders won't underwrite loans for more than an appraisal.
The spread will close eventually, and with home prices in the state forecast to rise 15 percent over the next three years just on the strengthening market, according to the National Association of Realtors, the increases are going to hit buyers sooner or later.
And now come some numbers to back up Crout's concerns, from the Associated General Contractors of America.
The AGC said the producer price index for construction materials jumped 1.3 percent between January and February, which was equal to the entire increase for 2012. The index was 2 percent higher than in February 2012, “outpacing the increase in the price contractors are able to charge for most types of new buildings,” he said.
Here are the fresh stats for the kinds of materials that go into any kind of building, whether offices, school buildings, warehouses or new homes:
• Gypsum products such as wallboard and plaster, up 4.4 percent in February, after an 11.8 percent jump in January, and a cumulative rise of 17.8 percent over the past 12 months.
• Lumber and plywood, up 2.3 percent in February and 15.8 percent from a year ago.
• Insulation, up 2.1 percent in February and 5.9 percent for the year.
• Diesel (freight), up 7.2 percent for the month and 3.8 percent year over year.
Prices for other materials, such as copper, brass, aluminum, steel, asphalt and concrete prices, were mixed, the AGC reported.
The increases are hitting just as contractors and homebuilders are ready to expand on a modest recovery in demand, while homebuyers and commercial users aren't necessarily in as good spirits. If appraisers aren't staying up to speed and lenders remain as squeamish — and tight — as they've been the past five or six years, well, then, there's that. For now.
You might or might not want to hug a builder. You definitely should brace yourself.