Without a doubt, 2022 will go down in history as one of the worst years for inflation in modern U.S. history. With the Consumer Price Index above 8% since March, we’re seeing the highest inflation levels in 40 years. Thanks to poor fiscal responsibility and highly questionable energy policies, rampant inflation and supply chain bottlenecks are starting to cripple our future supply of new products introduced into the Boston housing market.
The cost of building materials is increasing by a much larger margin than CPI. The current PPI for New Nonresidential Building Construction is up by 24% over the past year. That triples the price increase for consumer products (CPI). Housing supply in Boston is already at a critical shortage, and now developers are faced with even more fiscal barriers in creating new housing inventory for Boston’s growing population. We could be entering a new age of unprecedented scarcity of new housing options.
Why Are Prices For Construction Material Rising Faster Than CPI?
There are three primary reasons that prices for construction materials are increasing faster than consumer products:
1. Increased Fuel Prices Due to Poor Legislative Policies.
Construction materials are heavy, and they take up massive amounts of space when being transported. Transporting large and heavy construction materials and equipment requires vast amounts of fuel. It will cost a lot less for a carrier to ship a tractor trailer full of potato chips than it would a truck full of plywood. Accordingly, you can bet that the truck full of plywood is going to use significantly more diesel fuel to ship that load across the country than the potato chip truck. Put another way, you are not using a Tesla or Prius to move lumber to a job site. The most recent price data shows that prices of diesel gas have risen by 49.3% in the past year. This is one of the factors driving up the cost of construction materials. When gas prices surge, the cost of per square foot (PSF) goes…