Building Material Shortages: Joint Results from Home Builder and Lumber Dealer Surveys

Transcription

1 Building Material s: Joint Results from Home Builder and Lumber Dealer Surveys June 2013

2 In May of 2013, the National Association of Home Builders (NAHB) and National Lumber and Building Material Dealers Association (NLBMDA) undertook a joint effort to survey their respective members on building material shortages and prices. The NAHB survey took the form of special questions appended to the monthly survey that serves as the basis for the NAHB/Wells Fargo Housing Market Index (HMI). The HMI survey is sent to a panel of builders primarily to gauge the overall strength of the single-family housing market, but also often includes a set of special questions on a topic of current interest to the housing industry. Since 1994 the survey has periodically included special questions on the availability of building materials. In 2011 these material questions were expanded to cover price changes over the past six months, and the expanded questions were the ones included on the May 2013 questionnaire. In that same month, NLBMDA partnered with NAHB to conduct a similar survey of NLBMDA members. To the extent possible given the nature of the businesses, the questions on the NLBMDA survey were the same as those on the NAHB survey. NLBMDA s members operate single or multiple lumber yards and component plants serving the residential construction industry, so they deal in many of the same products single-family builders purchase, but are one step upstream in the distribution channel. Survey data were collected from both NAHB builders and NLBMDA dealers during the first half of May. Over that approximately two-week span, 383 builders and 230 dealers provided responses. Highlights of the results include the following: Reflecting the modest recovery in the housing industry, lumber and building material dealers reported an average 6.9 percent increase in the volume of their sales over the past six months (Exhibit 1). As a class, the lumber dealers handle all of the 24 products purchased by single family builders that were covered in the two surveys. Dealers are much more likely to handle some products than others. For example, 95 to 96 percent of them handle framing lumber, OSB and plywood; but only 12 percent handle HVAC equipment (Exhibit 2). Among builders, the highest incidence of shortages was for OSB (with 22 percent of builders reporting shortages), followed by gypsum wall board (20 percent), framing lumber (18 percent) and plywood (also 18 percent). Except for wall board, the incidence of shortages for these products was higher among dealers, with 27 to 28 percent reporting shortages of OSB and plywood, and 36 percent reporting a shortage of framing lumber (Exhibit 3). Dealers are a step upstream in the distribution channel, so this may reflect advance knowledge of shortages before they are experienced by home builders. For most of the 24 products and materials covered by the survey, the share of builders reporting a shortage was much higher in May of 2013 than it was in 2011 or The only exceptions were copper wire, vinyl siding, HVAC, insulation, and SIPs (Exhibit 8). 1

3 For example, the share of builders reporting a shortage of framing lumber jumped from 3 to 4 percent in 2011 and 2012 to 18 percent in May of 2013 (Exhibit 4). The share had been as high as 24 percent in October of 2004, but starts at that time were over 2 million. Similarly, the share of builders reporting a shortage of gypsum wall board increased from 6 percent in 2011 to 11 percent in 2012 and 20 percent in May of 2013 (Exhibit 5). The share had been as high as 34 percent in May of 2006, but starts were near 2 million at that time. The share of builders reporting a shortage of OSB jumped from 3 to 4 percent in 2011 and 2012 to 22 percent in May of 2013 (Exhibit 6). The share had been as high as 52 percent in October of 2003, when starts were 1.9 million. The share of builders reporting a shortage of plywood jumped from 2 to 3 percent in 2011 and 2012 to 18 percent in May of 2013 (Exhibit 7). The share had been as high as 39 percent in October of The increase in the incidence of shortages in May of 2013 is surprising at this early stage of the housing recovery, with total housing starts just now edging up to a rate of million a year about the level of starts in the industry s worst post-war recession before Ninety to 92 percent of single-family builders reported that prices of OSB, framing lumber and plywood had increased. The percentages were even higher (95 to 96) among the lumber and building material dealers. With the exception of 3 concrete-related products, a larger share of lumber dealers than builders reported price increases (Exhibit 9). On average, builders reported a 5.17 percent increase in the materials that go into a house over the past six months. For the lumber dealers, an average couldn t be calculated, because most of them checked the upper ended category 10 percent or more (Exhibit 10). The greater average price increase reported by the lumber dealers could in part reflect advance knowledge by businesses upstream in the distribution channel, but it is also likely a result of the product mix differences shown in Exhibit 2. In May of 2013, the share of builders reporting that prices had increased over the past 6 months was higher than in either 2011 or 2012 for every building product or material, except vinyl siding, roofing, and cooper wiring (Exhibit 11). These results are discussed in more detail in the subsequent section. Following that, Appendix IA shows detailed tables for single-family builders who responded to NAHB s May 2013 survey, with results broken down by region of the country and number of units started. Appendix IB shows detailed tables for the lumber and building material dealers who responded to NLBMDA s May 2013 survey, with results broken down by gross sales volume. Appendix II reproduces the questionnaires used in the two surveys. 2

4 Increase in Market Activity In response to questions about the total volume of their sales, 21 percent of NLBMDA members said sales had stayed about the same of the past 6 months, 16 percent said sales had increased at least 10 but less than 15 percent, and 15 percent said sales had increased at least 5 but less than 10 percent (Exhibit 1). On average across all lumber and building material dealers responding to the survey, sales over the past six months increased 6.9 percent. Exhibit 1. CHANGE IN SALES VOLUME FOR LUMBER DEALERS PAST SIX MONTHS Declined 14% Stayed about the same 21% Increased by less than 5% 14% Increased 5% to 10% 15% Increased 10% to 15% 16% Increased 15% to 20% Increased 20% to 30% 6% 6% Average=6.9%* Increased 30% or more 8% *Calculated assuming the midpoint of each category, with the highest and lowest values restricted to stay within the top and bottom 15 percent of the observations, a procedure called Winsorizing that is designed to limit the influence of extreme values. Because Winsorizing uses more of the information available in the data, statisticians generally consider it preferable to the median for this purpose. This reflects a general increase in home building activity over that same period, as the housing industry is in the process of recovering from a historic trough. The monthly starts series has been volatile, especially in the last months before the builder and lumber dealer surveys were conducted, but the number of units under construction at any one time (which is probably a better indication of demand for building materials than starts) has been rising consistently every month. In October of 2012, the seasonally adjusted number of housing units under construction was 520,000. In April of 2013 it was 605,000 a 16 percent increase. This is above the average increase in sales reported by lumber dealers in general, although the larger dealers seem to have done somewhat better. The average increase in sales over the past six months was 10.9 percent for dealers with $10 to $20 million in annual gross revenue and 12.8 percent for those with over $30 million (Appendix IB). 3

5 Evidence of s Before investigating shortages for particular building products and materials, it s necessary to consider the mix of products purchased by home builders and lumber dealers. Both the builder and dealer surveys asked about the same 24 distinct categories of products. Three quarters of these products are purchased by the vast majority (over 80 percent) of single-family builders. Not surprisingly, virtually all builders reported buying products such as roofing materials, wall board, windows and doors, and framing lumber (Exhibit 2). Many of these products are bought and sold by the vast majority lumber dealers as well. For example, 95 to 96 percent of lumber dealers purchase framing lumber, OSB and plywood. Considered as a class, lumber dealers sell all 24 building products covered in the survey, but some products are sold by a relatively small share. The leading example is HVAC equipment a product line for only 12 percent of the dealers. These results are consistent with a recent NAHB survey that asked builders about where they go to buy various products. Over 80 percent of single-family builders said they usually buy sawn lumber, plywood and OSB from lumber yards, but only 1 percent cited lumber yards as the main source for HVAC equipment. (See the HousingEconomics.com Special Study for November 2012 Buying Products for Home Building & Remodeling: Who and Where for the complete breakdown.) Exhibit 3 shows the shares of home builders and lumber dealers who reported shortages of each of the 24 building products, based only on the builders and dealers who actually purchase these products. The percentages in the exhibit are builders and dealers who reported either some or a serious shortage for a particular product. Relatively few respondents classified any of the shortages as serious (see Exhibit 8, Appendix IA and Appendix IB for separate some/serious percentages). For the home builders perspective, shortages of OSB are the most widespread of any building material (with 22 percent of builders reporting some or serious shortages), followed by gypsum wall board (20 percent), framing lumber (18 percent) and plywood (also 18 percent). A smaller share of lumber dealers reported a shortage of wall board, but 27 to 28 percent of the dealers reported shortages of OSB and plywood and 36 percent reported a shortage of framing lumber. These numbers are higher than the share of builders reporting shortages of any product or material. Substantial numbers of lumber dealers also reported shortages of roofing material and millwork 29 and 21 percent, respectively, much higher than the share of home builders who were experiencing a shortage of these items. is a relative term, and we have no history on how the building material dealers reacted to past cycles. So it s unclear whether they are actually experiencing worse shortages than builders, reacting to the shortages that do exist with greater concern, or witnessing trends earlier because they are upstream in the distribution channel. 4

6 Exhibit 2. SHARE WHO PURCHASE VARIOUS MATERIALS Roofing materials Gypsum wall board Millwork Windows and Doors Framing lumber Insulation material Ceramic Tiles Plumbing fixtures & fittings Cabinets HVAC equipment Hardwood flooring Ready-mix concrete Orient Strand Board (OSB) Copper wiring Plywood Cement Trusses Concrete brick and block Clay brick Vinyl siding Steel Beams Steel (Lightweight) Structural Insulated Panels Other 99% 80% 99% 86% 99% 90% 99% 92% 99% 95% 98% 85% 97% 25% 97% 40% 97% 56% 96% 12% 96% 50% 95% 58% 95% 96% 93% 37% 89% 95% 88% 58% 87% 82% 83% 57% 74% 25% 66% 57% 62% 30% 37% 35% 32% 24% 61% 14% BUILDERS DEALERS 5

7 Exhibit 3. SHARE REPORTING A SHORTAGE (EITHER SERIOUS OR SOME) Based on Builders and Dealers Who Purchase the Materials Orient Strand Board (OSB) Gypsum wall board Framing lumber Plywood Trusses Clay brick Roofing materials Structural Insulated Panels Windows and Doors Cabinets Millwork Hardwood flooring Steel (Lightweight) Concrete brick and block Ready-mix concrete Insulation material Copper wiring Steel Beams Plumbing fixtures & fittings Ceramic Tiles Cement Vinyl siding HVAC equipment Other 22% 20% 12% 18% 18% 14% 10% 13% 5% 12% 10% 4% 9% 9% 9% 4% 8% 21% 8% 10% 8% 4% 7% 4% 7% 1% 6% 9% 6% 4% 6% 3% 6% 2% 6% 2% 5% 2% 4% 2% 3% 0% 11% 17% 28% 27% 29% BUILDERS DEALERS 36% 6

8 The s in Historical Perspective As mentioned in the introduction, the HMI has included questions on building materials for over a decade, so history is available on shortages reported by builders. Between May 2006 and June of 2011, the home building industry was either in severe decline or lying near the bottom of a historically low trough, so material shortages were not an issue that needed to be addressed in the survey. In June 2011 the questions on building materials were revised slightly, primarily by expanding the list to include 24 distinct products, and the revised versions of the questions were repeated in April of 2012 and, most recently, in May of In 2011 and 2012, the residential construction industry had not recovered very far yet, and, where the data were comparable, the share of builders reporting shortages was near historic lows. But in May of 2013 a modest housing recovery was under way, and the share of builders reporting a shortage in most cases rose substantially above the levels. The only exceptions were copper wire and vinyl siding (availability of which improved modestly since 2011), HVAC and insulation materials (which stayed about the same), and structural insulated panels (availability of which was worse in 2013 than in 2012, but about the same as in 2011). The increase in the incidence of shortages reported by builders was strongest in gypsum wall board and various lumber categories. Over the longer term, shortages of these materials have at times been more widespread, but the current shortages are surprisingly at this early stage of the housing recovery. Total housing starts are just now edging up to a rate of million a year, about the level of starts in the industry s worst post-war recession before Exhibit 4 compares the percentage of builders reporting a shortage of framing lumber to the seasonally adjusted annual rate of housing starts since The share reporting a shortage jumped from 3 to 4 percent in 2011 and 2012 to 18 percent in May of The share had been as high as 24 percent in October of 2004, when starts were over 2 million. So 18 percent is a surprisingly high incidence of shortages given the current starts rate of under 1 million. In comparison, 36 percent of lumber dealers reported a shortage of framing lumber in May of Exhibit 5 compares the percentage of builders reporting a shortage of gypsum wall board to the seasonally adjusted annual rate of housing starts since The share reporting a shortage increased from 6 percent in 2011 to 11 percent in 2012 and 20 percent in May of The share had been as high as 34 percent in May of 2006, when starts were near 2 million. So 20 percent is a surprisingly high incidence of shortage given the current starts rate of under 1 million. In comparison, only 12 of lumber dealers reported a shortage of wall board in May of

9 Starts 2,000 Exhibit 4. HOUSING STARTS (AREA) AND FRAMING LUMBER SHORTAGE (BARS) , , Starts 2,000 Exhibit 5. HOUSING STARTS (AREA) AND GYPSUM WALLBOARD SHORTAGE (BARS) , ,

10 Exhibit 6 compares the percentage of builders reporting a shortage of OSB to the seasonally adjusted annual rate of housing starts since The share reporting a shortage jumped from 3 to 4 percent in 2011 and 2012 to 22 percent in May of The share had been as high as 52 percent in October of 2003, when starts were 1.9 million. So a surge to 22 percent is surprising given the current starts rate of under 1 million. In comparison, 28 of lumber dealers reported a shortage of OSB in May of Exhibit 7 compares the percentage of builders reporting a shortage of plywood to the seasonally adjusted annual rate of housing starts since The share reporting a shortage jumped from 2 to 3 percent in 2011 and 2012 to 18 percent in May of The share had been as high as 39 percent in October of 2003, when starts were 1.9 million. So 18 percent is a surprisingly high incidence of shortages given the current starts rate of under 1 million. In comparison, 27 of lumber dealers reported a shortage of plywood in May of Exhibit 8 shows the complete history of responses to the HMI question on shortages of building materials. 9

11 Starts 2,000 Exhibit 6. HOUSING STARTS (AREA) AND OSB SHORTAGE (BARS) 0.5 1, , Starts 2,000 Exhibit 7. HOUSING STARTS (AREA) AND PLYWOOD SHORTAGE (BARS) 0.4 1, ,

12 Exhibit 8. Current Availability of Materials HISTORY No Some Serious Cement/Ready-mix concrete+ May-13 94% 6% 0% Apr-12 98% 2% 0% Jun-11 97% 3% 0% May-06 75% 23% 1% Nov-05 68% 28% 4% Oct-05 64% 29% 7% Jul-05 71% 25% 5% Jan-05 71% 24% 4% Oct-04 61% 34% 4% Jul-04 59% 34% 7% May-04 88% 8% 3% Mar-04 96% 3% 0% Oct-03 98% 2% 0% Oct-02 98% 2% 0% Jun-01 96% 4% 0% Jul-00 89% 11% 0% Jan-00 90% 10% 0% Mar-99 87% 13% 0% Jun-98 86% 10% 4% Dec-96 90% 8% 2% Sep-94 90% 8% 2% Ready-mix concrete May-13 93% 7% 0% Apr-12 97% 3% 0% Jun-11 98% 2% 0% Jul-05 70% 26% 3% Jan-05 73% 24% 3% 11

13 Exhibit 8. Current Availability of Materials HISTORY (continued) No Some Serious Concrete brick and block May-13 94% 6% 0% Apr-12 96% 4% 0% Jun-11 96% 2% 0% May-06 83% 16% 1% Nov-05 75% 23% 2% Oct-05 73% 24% 5% Jul-05 80% 18% 2% Jan-05 80% 15% 6% Oct-04 73% 23% 6% Jul-04 75% 20% 4% May-04 88% 10% 2% Mar-04 93% 7% 0% Oct-03 96% 4% 0% Oct-02 96% 4% 0% Jun-01 88% 12% 0% Jul-00 76% 20% 5% Jan-00 80% 18% 2% Mar-99 91% 8% 1% Jun-98 92% 6% 2% Clay brick May-13 86% 14% 0% Apr-12 95% 5% 0% Jun-11 96% 4% 0% May-06 74% 21% 5% Nov-05 71% 25% 4% Oct-05 72% 21% 6% Jul-05 70% 27% 4% Jan-05 70% 25% 5% Oct-04 59% 33% 8% Jul-04 63% 30% 7% May-04 77% 20% 2% Mar-04 77% 22% 1% Oct-03 91% 9% 0% Oct-02 88% 12% 0% Jun-01 69% 27% 4% Jul-00 50% 34% 16% Jan-00 40% 39% 21% Mar-99 77% 20% 3% Jun-98 87% 12% 1% 12

14 Exhibit 8. Current Availability of Materials HISTORY (continued) No Some Serious Vinyl siding Insulation material May-13 97% 3% 0% Apr-12 96% 3% 0% Jun-11 94% 4% 0% May-13 95% 6% 0% Apr-12 95% 5% 0% Jun-11 94% 5% 0% May-06 80% 18% 2% Nov-05 87% 12% 1% Oct-05 86% 13% 1% Jul-05 90% 10% 0% Jan-05 86% 13% 0% Oct-04 80% 19% 2% Jul-04 80% 19% 1% May-04 87% 12% 0% Mar-04 89% 10% 0% Oct-03 96% 3% 1% Oct-02 94% 6% 0% Jun-01 98% 2% 0% Jul-00 80% 20% 0% Jan-00 61% 37% 1% Mar-99 58% 34% 7% Jun-98 88% 10% 2% Structural Insulated Panels (SIP) May-13 91% 9% 0% Apr-12 97% 3% 0% Jun-11 91% 9% 0% May-06 92% 8% 0% Nov-05 94% 3% 0% Oct-05 91% 9% 0% Oct-04 87% 8% 5% Jul-04 89% 8% 3% May-04 88% 7% 5% Mar-04 95% 5% 3% 13

15 Exhibit 8. Current Availability of Materials HISTORY (continued) No Some Serious Steel (Lightweight for framing) May-13 92% 8% 0% Apr-12 95% 7% 0% Jun-11 93% 7% 2% May-06 93% 5% 0% Nov-05 79% 19% 2% Oct-05 87% 10% 3% Oct-04 71% 24% 5% Jul-04 74% 19% 5% May-04 68% 25% 8% Mar-04 86% 13% 2% Steel Beams May-13 94% 6% 0% Apr-12 96% 4% 0% Jun-11 95% 5% 2% May-06 91% 9% 0% Nov-05 88% 10% 1% Oct-05 90% 9% 1% Oct-04 79% 16% 4% Jul-04 81% 18% 1% May-04 76% 20% 4% Mar-04 86% 10% 4% Trusses May-13 86% 13% 1% Apr-12 98% 2% 0% Jun-11 97% 2% 0% May-06 94% 6% 0% Nov-05 93% 7% 0% Oct-05 88% 11% 1% Jul-05 95% 4% 0% Jan-05 92% 7% 0% Oct-04 86% 12% 2% Jul-04 90% 9% 0% May-04 92% 7% 0% Mar-04 93% 5% 0% 14

16 Exhibit 8. Current Availability of Materials HISTORY (continued) No Some Serious Framing lumber May-13 82% 16% 2% Apr-12 97% 3% 0% Jun-11 96% 4% 0% May-06 95% 5% 0% Nov-05 88% 11% 1% Oct-05 80% 18% 2% Jul-05 95% 5% 0% Jan-05 88% 12% 0% Oct-04 76% 23% 1% Jul-04 84% 13% 2% May-04 81% 17% 2% Mar-04 79% 20% 1% Oct-03 84% 14% 2% Oct-02 99% 1% 0% Jun-01 96% 4% 0% Jul-00 92% 8% 0% Jan-00 90% 9% 1% Mar-99 90% 9% 1% Jun-98 93% 7% 0% Dec-96 78% 21% 1% Sep-94 81% 18% 1% Gypsum wall board May-13 80% 18% 2% Apr-12 89% 11% 0% Jun-11 94% 6% 0% May-06 66% 29% 5% Nov-05 71% 26% 3% Oct-05 73% 23% 3% Jul-05 78% 21% 1% Jan-05 83% 16% 1% Oct-04 73% 25% 1% Jul-04 75% 24% 1% May-04 81% 17% 2% Mar-04 83% 16% 0% Oct-03 89% 11% 0% Oct-02 92% 8% 0% Jun-01 91% 9% 0% Jul-00 72% 26% 2% Jan-00 31% 61% 8% Mar-99 40% 41% 18% Jun-98 84% 15% 1% Dec-96 73% 23% 3% Sep-94 76% 23% 1% 15

17 Exhibit 8. Current Availability of Materials HISTORY (continued) No Some Serious Orient Strand Board (OSB) May-13 78% 19% 3% Apr-12 96% 4% 0% Jun-11 97% 3% 0% May-06 89% 11% 1% Nov-05 73% 25% 2% Oct-05 68% 26% 6% Jul-05 91% 9% 0% Jan-05 77% 22% 0% Oct-04 63% 33% 3% Jul-04 69% 26% 5% May-04 70% 22% 7% Mar-04 55% 40% 6% Oct-03 47% 37% 15% Oct-02 98% 2% 0% Jun-01 97% 3% 0% Plywood May-13 81% 16% 2% Apr-12 97% 3% 0% Jun-11 98% 2% 0% May-06 89% 10% 0% Nov-05 76% 21% 2% Oct-05 71% 23% 5% Jul-05 90% 10% 0% Jan-05 82% 16% 1% Oct-04 69% 29% 2% Jul-04 76% 22% 3% May-04 72% 22% 7% Mar-04 63% 33% 4% Oct-03 61% 29% 10% Oct-02 98% 2% 0% Jun-01 96% 4% 0% Jan-00# 90% 10% 0% Cabinets May-13 91% 7% 1% Apr-12 97% 3% 0% Jun-11 98% 2% 0% 16

18 Exhibit 8. Current Availability of Materials HISTORY (continued) No Some Serious Millwork May-13 92% 8% 0% Apr-12 97% 3% 0% Jun-11 95% 4% 0% Windows and Doors May-13 91% 9% 0% Apr-12 98% 2% 0% Jun-11 96% 4% 0% May-06 93% 6% 1% Nov-05 94% 5% 1% Oct-05 93% 5% 1% Jul-05 95% 4% 0% Jan-05 95% 6% 0% Oct-04 93% 7% 0% Jul-04 96% 4% 0% May-04 96% 3% 0% Mar-04 96% 3% 0% Oct-03 97% 2% 1% Oct-02 98% 2% 0% Jun-01 96% 4% 0% Jul-00 90% 10% 0% Hardwood flooring May-13 94% 6% 1% Apr-12 97% 3% 0% Jun-11 99% 1% 0% Ceramic Tiles May-13 95% 5% 1% Apr-12 94% 5% 0% Jun-11 96% 3% 1% Roofing materials May-13 88% 11% 1% Apr-12 91% 8% 1% Jun-11 89% 10% 1% May-06 81% 17% 2% Nov-05 78% 19% 2% Oct-05 75% 18% 6% Jul-05 81% 14% 5% Jan-05 81% 14% 6% Oct-04 79% 19% 3% Jul-04 88% 10% 1% May-04 90% 9% 1% Mar-04 91% 9% 0% Oct-03 95% 4% 1% 17

19 Exhibit 8. Current Availability of Materials HISTORY (continued) No Some Serious Roofing materials - continued Oct-02 96% 4% 0% Jun-01 95% 5% 0% Jul-00 89% 10% 0% Jan-00 88% 12% 0% Mar-99 90% 9% 1% Plumbing fixtures & fittings HVAC equipment Copper wiring May-13 94% 6% 0% Apr-12 96% 3% 0% Jun-11 97% 3% 0% May-13 97% 3% 0% Apr-12 98% 1% 0% Jun-11 97% 2% 0% May-13 95% 4% 1% Apr-12 93% 6% 0% Jun-11 90% 9% 1% Notes: (+) Prior to Jan. '05 Cement and ready-mix concrete were combined. (#) Plywood/OSB. 18

20 Price Changes For the same 24 categories of building products and materials, the two surveys also asked if prices over the past 6 months had increased, declined, or remained unchanged. In May of 2013, very few respondents reported that prices for any product or material had declined recently (Appendix IA and IB). Exhibit 9 shows the share who reported prices had increased (again, based on home builders and lumber dealers who purchased the products). Ninety to 92 percent of single-family builders reported that prices of OSB, framing lumber and plywood had increased. The percentages were even higher (95 to 96) among the lumber and building material dealers. With the exception of the 3 concrete-related products (cement, ready-mix concrete and concrete brick and block), more lumber dealers than builders reported price increases. The dealer-builder differences were particularly strong for insulation materials, millwork, windows and doors, vinyl siding, SIPs, and hardwood flooring. Note that, in most of these cases, the vast majority of lumber and building material dealers were reporting price increases even though relatively few of them were reporting shortages for the same materials. That still leaves the question of how quickly prices are rising. To get a rough idea, the two surveys asked over the past six month how prices had changed overall, either for materials that go into a house (for home builders) or for all products sold (for lumber and building material dealers). On average builders reported a 5.17 percent increase in the materials that go into a house over the past six months. For the lumber dealers, an average couldn t be calculated, because most of them checked the upper ended category 10 percent or more (Exhibit 10). The greater average price increase reported by the lumber dealers could in part reflect advance knowledge by businesses in the distribution channel, but it is likely also a result of the product mix differences shown in Exhibit 2. Lumber dealers tend to be engaged in selling products like OSB, framing lumber, plywood and wallboard, where the incidence of shortages and price increases are disproportionately high. Limited history on price changes is available from the HMI survey of single-family builders (Exhibit 11). The 24-item price question was asked in its current form in June of 2011 and April of In May of 2013, the share of builders reporting that prices had increased over the past 6 months was higher than in either 2011 or 2012 for every building product or material, except vinyl siding, roofing, and cooper wiring. 19

21 Exhibit 9. SHARE REPORTING THAT PRICES INCREASED OVER THE PAST SIX MONTHS Based on Builders and Dealers Who Purchase the Materials Oriented Strand Board (OSB) Framing lumber Plywood Gypsum wall board Trusses Ready-mix concrete Roofing materials Cement Insulation material Copper wiring Millwork Windows and Doors Concrete brick and block Vinyl siding Steel Beams Cabinets Structural Insulated Panels HVAC equipment Steel (Lightweight) Plumbing fixtures & fittings Clay brick Hardwood flooring Ceramic tiles Other 34% 92% 95% 92% 95% 90% 96% 89% 92% 80% 90% 78% 63% 76% 83% 74% 72% 67% 86% 65% 70% 64% 82% 62% 85% 61% 57% 59% 76% 58% 62% 57% 66% 57% 89% 57% 58% 56% 69% 56% 67% 52% 58% 46% 72% 43% 47% 55% BUILDERS DEALERS 20

22 Exhibit 10. OVERALL CHANGE IN MATERIAL PRICES PAST 6 MONTHS For Same House/Across All Products Sold Decreased Stayed about the same Increased less than 2% Increased 2% to 4% Increased 4% to 6% Increased 6% to 8% Increased 8% to 10% Increased 10% or more 0% 0% 3% 1% 10% 1% 9% 15% 13% 12% 5% 7% 14% 26% 30% BUILDERS DEALERS Average Increase: BUILDERS=5.17%* DEALERS= Over 10% 54% *Calculated assuming the midpoint of each category, with the highest and lowest values restricted to stay within the top and bottom 18 percent of the observations, a procedure called Winsorizing (see footnote to Exhibit 2). 21

23 Exhibit 11. Change in prices now vs. 6 months ago HISTORY Based on builders who purchase the materials only June 2011 April 2012 May 2013 Cement Increased Decreased No change Ready-mix concrete Increased Decreased No change Concrete brick and block Increased Decreased No change Clay brick Increased Decreased No change Vinyl siding Increased Decreased No change Insulation material Increased Decreased No change Structural Insulated Panels Increased Decreased No change Steel (Lightweight) Increased Decreased No change Steel Beams Increased Decreased No change Trusses Increased Decreased No change

24 Exhibit 11. Change in prices now vs. 6 months ago HISTORY (continued) Framing lumber June 2011 April 2012 May 2013 Increased Decreased No change Gypsum wall board Increased Decreased No change Oriented Strand Board (OSB) Increased Decreased No change Plywood Increased Decreased No change Cabinets Increased Decreased No change Millwork Increased Decreased No change Windows and Doors Increased Decreased No change Hardwood flooring Increased Decreased No change Ceramic tiles Increased Decreased No change

25 Exhibit 11. Change in prices now vs. 6 months ago HISTORY (continued) Roofing materials June 2011 April 2012 May 2013 Increased Decreased No change Plumbing fixtures & fittings Increased Decreased No change HVAC equipment Increased Decreased No change Copper wiring Increased Decreased No change Other Increased Decreased No change

26 Appendix IA: Detailed Tables from the Builders Survey 25

27 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE Total Region No. of For-Sale Units Started in 2012 NE MW S W < Cement No shortage Some shortage Serious shortage Responses Ready-mix concrete No shortage Some shortage Serious shortage Responses Concrete brick & block No shortage Some shortage Serious shortage Responses Clay brick No shortage Some shortage Serious shortage Responses Vinyl siding No shortage Some shortage Serious shortage Responses Insulation material No shortage Some shortage Serious shortage Responses

28 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE - continued Total Region No. of For-Sale Units Started in 2012 NE MW S W < Structural Insulated Panels (SIP) No shortage Some shortage Serious shortage 1 3 Responses Steel (Lightweight for framing) No shortage Some shortage Serious shortage Responses Steel Beams No shortage Some shortage Serious shortage Responses Trusses No shortage Some shortage Serious shortage Responses Framing lumber No shortage Some shortage Serious shortage Responses Gypsum wall board No shortage Some shortage Serious shortage Responses

29 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE - continued Total Region No. of For-Sale Units Started in 2012 NE MW S W < Oriented Strand Board (OSB) No shortage Some shortage Serious shortage Responses Plywood No shortage Some shortage Serious shortage Responses Cabinets No shortage Some shortage Serious shortage Responses Millwork No shortage Some shortage Serious shortage Responses Windows and Doors No shortage Some shortage Serious shortage Responses Hardwood flooring No shortage Some shortage Serious shortage Responses

30 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE - continued Total Region No. of For-Sale Units Started in 2012 NE MW S W < Ceramic tiles No shortage Some shortage Serious shortage Responses Roofing materials No shortage Some shortage Serious shortage Responses Plumbing fixtures & fittings No shortage Some shortage Serious shortage Responses HVAC equipment No shortage Some shortage Serious shortage Responses Copper wiring No shortage Some shortage Serious shortage Responses Other No shortage Some shortage Serious shortage Responses

31 Q1. Change in prices now vs. 6 months ago Total Region No. of For-Sale Units Started in 2012 NE MW S W < Cement Increased Decreased No change Responses Ready-mix concrete Increased Decreased No change Responses Concrete brick and block Increased Decreased No change Responses Clay brick Increased Decreased No change Responses Vinyl siding Increased Decreased No change Responses Insulation material Increased Decreased No change Responses

32 Q1. Change in prices now vs. 6 months ago - continued Total No. of For-Sale Units Region Started in 2012 NE MW S W < Structural Insulated Panels (SIP) Increased Decreased No change Responses Steel (Lightweight for framing) Increased Decreased No change Responses Steel Beams Increased Decreased No change Responses Trusses Increased Decreased No change Responses Framing lumber Increased Decreased No change Responses Gypsum wall board Increased Decreased No change Responses

33 Q1. Change in prices now vs. 6 months ago continued No. of For-Sale Units Started in Region Total 2012 NE MW S W < Oriented Strand Board (OSB) Increased Decreased No change Responses Plywood Increased Decreased No change Responses Cabinets Increased Decreased No change Responses Millwork Increased Decreased No change Responses Windows and Doors Increased Decreased No change Responses Hardwood flooring Increased Decreased No change Responses

34 Q1. Change in prices now vs. 6 months ago - continued Total Region No. of For-Sale Units Started in 2012 NE MW S W < Ceramic tiles Increased Decreased No change Responses Roofing materials Increased Decreased No change Responses Plumbing fixtures & fittings Increased Decreased No change Responses HVAC equipment Increased Decreased No change Responses Copper wiring Increased Decreased No change Responses Other Increased Decreased No change Responses

35 Q2. Overall, how have total material costs for the same house changed over the past 6 months? (Percent of respondents) Total Region No. of For-Sale Units Started in 2012 NE MW S W < Declined Stayed about the same Increased by less than 2% Increased 2% to 3.99% Increased 4% to 5.99% Increased 6% to 7.99% Increased 8% to 9.99% Increased 10% or more Average* Responses *Calculated assuming the midpoint of each category and Winsorizing 18 percent of the responses at the top and bottom. 34

36 Appendix IB: Detailed Tables from the Lumber Dealers Survey 35

37 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE Total Annual Gross Revenue Under $10 $10 million to Over $30 million $30 million million Cement No shortage Some shortage Responses Ready-mix concrete No shortage Some shortage 1 3 Responses Concrete brick and block No shortage Some shortage Responses Clay brick No shortage Some shortage Responses Vinyl siding No shortage Some shortage 2 4 Responses Insulation material No shortage Some shortage Responses Structural Insulated Panels (SIP) No shortage Some shortage Responses

38 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE - continued Total Annual Gross Revenue Under $10 million $10 million to Over $30 $30 million million Steel (Lightweight for framing) No shortage Some shortage Responses Steel Beams No shortage Some shortage 3 9 Responses Trusses No shortage Some shortage Responses Framing lumber No shortage Some shortage Serious shortage Responses Gypsum wall board No shortage Some shortage Responses Oriented Strand Board (OSB) No shortage Some shortage Serious shortage Responses

39 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE - continued Total Annual Gross Revenue Under $10 million $10 million to Over $30 $30 million million Plywood No shortage Some shortage Serious shortage 1 2 Responses Cabinets No shortage Some shortage Responses Millwork No shortage Some shortage Serious shortage Responses Windows and Doors No shortage Some shortage Responses Hardwood flooring No shortage Some shortage Serious shortage 1 3 Responses Ceramic tiles No shortage Some shortage 2 9 Responses

40 Q1. Current Availability of Materials : WITHOUT DO NOT PURCHASE - continued Total Annual Gross Revenue Under $10 million $10 million to Over $30 $30 million million Roofing materials No shortage Some shortage Serious shortage Responses Plumbing fixtures & fittings No shortage Some shortage Responses HVAC equipment No shortage Responses Copper wiring No shortage Some shortage Responses Other No shortage Some shortage 6 25 Serious shortage Responses

41 Q1. Change in prices now vs. 6 months ago Total Annual Gross Revenue Under $10 million $10 million to Over $30 $30 million million Cement Increased No change Responses Ready-mix concrete Increased Decreased 1 3 No change Responses Concrete brick and block Increased Decreased 1 3 No change Responses Clay brick Increased No change Responses Vinyl siding Increased Decreased No change Responses Insulation material Increased Decreased No change Responses

42 Q1. Change in prices now vs. 6 months ago - continued Total Annual Gross Revenue Under $10 $10 million to Over $30 million $30 million million Structural Insulated Panels (SIP) Increased No change Responses Steel (Lightweight for framing) Increased Decreased No change Responses Steel Beams Increased Decreased 2 4 No change Responses Trusses Increased Decreased 1 2 No change Responses Framing lumber Increased Decreased No change Responses Gypsum wall board Increased Decreased 1 2 No change Responses

43 Q1. Change in prices now vs. 6 months ago - continued Total Annual Gross Revenue Under $10 million $10 million to Over $30 $30 million million Oriented Strand Board (OSB) Increased Decreased No change 1 3 Responses Plywood Increased Decreased No change 1 2 Responses Cabinets Increased No change Responses Millwork Increased Decreased No change Responses Windows and Doors Increased Decreased 2 3 No change Responses Hardwood flooring Increased No change Responses

44 Q1. Change in prices now vs. 6 months ago - continued Total Annual Gross Revenue Under $10 $10 million to Over $30 million $30 million million Ceramic tiles Increased Decreased 2 8 No change Responses Roofing materials Increased Decreased No change Responses Plumbing fixtures & fittings Increased Decreased 1 5 No change Responses HVAC equipment Increased No change Responses Copper wiring Increased Decreased No change Responses Other Increased No change Responses

45 Q2. On average across all product lines, how have prices for the materials you sell changed over the past 6 months? (Percent of respondents) Total Annual Gross Revenue Percent Under $10 $10 million to Over $30 million $30 million million Stayed about the same Increased by less than 2% Increased 2% to 3.99% Increased 4% to 5.99% Increased 6% to 7.99% Increased 8% to 9.99% Increased 10% or more Responses Q3. Over the past 6 months, how has the total volume of your sales changed? (Percent of respondents) Total Annual Gross Revenue Percent Under $10 $10 million to Over $30 million $30 million million Declined Stayed about the same Increased by less than 5% Increased 5% to 9.99% Increased 10% to 14.99% Increased 15% to 19.99% Increased 20% to 29.99% Increased 30% or more Average* Responses *Calculated assuming the midpoint of each category and Winsorizing 15 percent of the responses at the top and bottom (26 percent for respondents with under $10 million in gross revenue) Q4. Approximately how much is your annual gross revenue (Percent of respondents) Total Annual Gross Revenue Percent Under $10 $10 million to Over $30 million $30 million million Under $10 million $10 million to $29.99 million $30 million to $59.99 million $60 million to $89.99 million $90 million or more Responses

46 Appendix II: Questionnaires 45

47 NAHB: HMI Survey Special Questions for May How would you describe the current availability of the following materials, as well as changes in their prices now vs. 6 months ago? Changes in Prices Now vs. 6 Current Availability months ago No shortage Some shortage Serious shortage Do not Purchase Increased Decreased Cement Ready-mix concrete Concrete brick and block Clay brick Vinyl siding Insulation material Structural Insulated Panels (SIP) Steel (Lightweight for framing) Steel Beams Trusses Framing lumber Gypsum wall board Oriented Strand Board (OSB) Plywood Cabinets Millwork Windows and Doors Hardwood flooring Ceramic tiles Roofing materials Plumbing fixtures & fittings HVAC equipment Copper wiring Other(Specify) 2. Overall, how have total material costs for the same house changed over the past 6 months? Declined Increased 4 to 5.99% Stayed about the same Increased 6 to 7.99% Increased by less than 2% Increased 8 to 9.99% Increased 2 to 3.99% Increased 10% or more No change THANK YOU 46

48 Survey of National Lumber and Building Material Dealers 1. How would you describe the current availability of the following materials, as well as changes in their prices now vs. 6 months ago? No shortage Current Availability Some shortage Serious shortage Do not Purchase Changes in Prices Now vs. 6 months ago No Increased Decreased change Cement Ready-mix concrete Concrete brick and block Clay brick Vinyl siding Insulation material Structural Insulated Panels (SIP) Steel (Lightweight for framing) Steel Beams Trusses Framing lumber Gypsum wall board Oriented Strand Board (OSB) Plywood Cabinets Millwork Windows and Doors Hardwood flooring Ceramic tiles Roofing materials Plumbing fixtures & fittings HVAC equipment Copper wiring Other(Specify) 2. On average across all product lines, how have prices for the materials you sell changed over the past 6 months? Declined Increased 4 to 5.99% Stayed about the same Increased 6 to 7.99% Increased by less than 2% Increased 8 to 9.99% Increased 2 to 3.99% Increased 10% or more 3. Over the past 6 months, how has the total volume of your sales changed? Declined Increased 10 to 14.9% Stayed about the same Increased 15 to 19.9% Increased by less than 5% Increased 20 to 29.9% Increased 5 to 9.9% Increased 30% or more 4. Approximately how much is your annual gross revenue? Under $10 million $60 million to $89.9 million $10 million to $29.9 million $90 million or more $30 million to $59.0 million 47 THANK YOU!