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You Must Be Kidding!

Recently we made two points about the cost of gypsum products, especially wallboard.  First, last year during the economic downturn, many gypsum suppliers reduced overall capacity by closing production plants.  Second, we illustrated the gypsum price increases for the last three years.

Robert Denk, Assistant Vice President for Forecasting and Analysis at the National Association of Home Builders (NAHB) posted in the Eye on Housing a comparison between the price of lumber and gypsum in light of the recovery in the residential markets.

According to the Bureau of Labor Statistics (BLS), Denk says that, “Building materials prices have been responding to the progress of the housing recovery.  Early improvements in the housing market put upward pressure on materials prices, particularly wood products and gypsum.  As the housing recovery has gained momentum some price relief has come from the re-opening of capacity idled during the housing bust.”

Sounds like the costs should be coming down as capacity is brought back online in response to the demand.

That may be the case for lumber, but certainly not for wallboard and other gypsum products.  Denk goes on to say that, “Gypsum prices are currently 33% above 2011 levels and 93% of housing boom peak levels based on two sharp steps up in the beginnings of 2012 and 2013.  There have been no significant gypsum price declines as the rest of the housing sector has moved steadily back toward more normal levels of production.  The announced 20% increase will bring prices to 60% above 2011 levels and 111% of housing boom peak levels.”

That is 111% of previous costs when we were at the top of the last cycle.

Since there is no indication that the producers will open more production to meet the current demand, it looks like you should plan for more price increases for 2015.

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