T-Time Ticking? Ken Pinto's Q4 Homebuilding Commodities Report

First, the gorilla in the room. I know you're thinking about tariffs now. It's understandable, and we're going to try to stay on top of that for you. Prepare for much hard work on costs, cycle times, and forward visibility to be at risk. For now, though, the verdict's not in. Don't fret about the opening gambits.

Stay tuned for what trade salvos stick and why.

And focus, as it's best always to do, on what you can control.

Amazon notifies me of pricing changes to the products I have saved for later in my cart. I keep about a dozen items there solely to observe price fluctuations. In October, I noticed that many of my items increased in price. When Black Friday approached, my selected products went on sale; however, the sale prices were higher than before the October increase.

This seems like a good way for manufacturers to increase profit margins just before an increase in demand while convincing customers how great the deal is. It happens like this every year.

It’s predictable.

Homebuilding purchasing departments are familiar with the end-of-year price increase letters and are pushing back. This may seem like standard operating procedure — commencing the longstanding tradition of year-end back-and-forth negotiation gambits — but this year, builders seem more determined to protect profit margins. They are feeling the pressure.

Ever-increasing direct costs and revenue erosion from sales incentives are squeezing profit margins. Slower sales in December and profit margins crunched by high direct costs and sales incentives are fueling the pushback. In December, NAHB chief economist Robert Dietz wrote about construction labor demand softening. Will trade contractors reduce their profit margins to maintain enough contracts to keep their installers busy?

Tariffs, or the potential for tariffs to impact building material pricing, dominate the minds of purchasing people. Time will tell if tariffs affect the end price of building materials, but one thing is sure: purchasing departments will have to sharpen their tools to control costs and predict fair price changes.

These are some of the tools I use:

●      Commodity Tracking (cement, copper wire, gypsum board, carpet filaments, stainless steel plate, steel rebar, acrylic resins, titanium oxide, asphalt, etc.)

When price increase requests are not aligned with commodity prices, you have reason to question the increased amount.

●      Spend Analysis

It is helpful for purchasing managers to know how much money they spend when talking to material suppliers. Unless you procure directly from a distributor or manufacturer, they likely don’t know how much you spend on their products and will often understate your business. Let them know how big your account is so they understand the risk of losing your business.

●      SKU Price Histogram

Over time, your tracking of how much you pay for ½-inch drywall will prove helpful in predicting future costs. Track as many of the high cost SKUs as you can manage.

●      Earnings Calls

Some materials suppliers are public companies and offer details on their operations in quarterly earnings calls for their shareholders. Much can be learned from these calls. Would you negotiate differently with a supplier with 14% profit margins than with a supplier with 32% margins?

●      Supply Chain Mapping

From raw materials to manufacturing, to distribution, to dealers, to trade contractors, and, finally, to the jobsite, map all the players in each of your building material supply chains to find opportunities to affect a reduction in their cost of doing business, which will reflect in lower pricing.

●      Product Availability Histogram/Journal

In 2021-22, we learned much about our supply chain—because it broke. Our industry’s inability to obtain building materials doubled construction cycle times, frustrating our ability to deliver homes on time. The next time demand outpaces supply, homebuilders who closely monitor product availability will be the first to secure the materials they need. The others will go to the back of the line.

Predicting future costs may be more art than science, but having good data will enhance your team’s ability to get it right and enable you to ask the right questions.

Quarterly Highlights

Aluminum Wire

Global demand for aluminum has been flat in Q4 and while prices have declined slightly, processing fees have increased. However, processing fees do not support the 68% increase in aluminum electrical wire this quarter. The culprit on the aluminum wire is supply and demand. We are still 667% above pre-Covid prices.

Copper Wire

Copper prices declined in November on reduced demand and dipped below $9,000 per metric ton. However, copper wire has been on the rise since February 2020. Wire prices are up 87% from December 2023 and up 483% since 2019. Two price increases occurred in January 2025 for a total of 17% in higher price quotes.

Stainless Steel Plate

Slowing demand on stainless steel has its price trending downward slightly. Stainless steel prices are down 5% in Q4, but are still 60% higher than pre-Covid.

Cement and Ready-Mix

Cement is up 20% since December 2023 and up 93% from 2019. Cement prices were stable through Q4, but ready-mix concrete has been on the rise due to aggregate pricing and logistics. For example, concrete batch plants in Northern California buy their aggregates (rocks) from Canada, transported via rail cars. You might be asking the same thing I did—have they run out of rocks in Northern California?

Drywall

The cost of raw materials, such as gypsum and paper, remain a central factor in pricing increases. As construction projects sprawl further from distribution centers, the cost of transportation becomes a more relevant factor in overall drywall pricing. Drywall was up 4% since December 2023 and is 60% above 2019 prices. Speculators anticipate a slow and steady rise in drywall pricing throughout the year.

Wall Insulation

Insulation prices did not change much in Q4. Insulation is up 8% since December 2023, and up 62% from 2019.

Diesel Fuel

Fuel prices are slightly down from a year ago and are stable for the moment. I’ve read just as many articles predicting fuel prices will increase as decrease. This is a difficult time to predict future fuel prices. For those purchasing agents that have old fuel surcharge change orders in play—it may be time to back those costs out.

Asphalt

This is the third consecutive quarter of falling asphalt prices. Prices are down only 3% for the past 12 months, but it sure beats an increase. The hurricane season was not too bad, so roof shingles diverted to re-roofs in the southeast had little impact on the availability of asphalt shingles.  

Looking Around the Next Corner

Speculators believe commodity prices are poised for multiple price increases this year. While some commodity prices are driven by hard costs, like energy and transportation, the biggest driver is supply and demand. If commercial and residential construction shows signs of growth, the letters signifying an imminent price increase will begin to fly about.

Lumber inventories are low—30 days of inventory is common, which is typical for this time of year. Many lumber mills across the country have shut down. If you plan to ramp up housing starts faster than your current pace, you may want to collaborate with your lumber distributors to ensure you will have what you need when you need it. Analysts anticipate lumber prices will rise steadily through spring and fall, but there are still deals to be had for those who can forecast new-home starts.