If you're in the construction business, or if you just enjoy building birdhouses from the lumber you buy at Home Depot (NYSE: HD) or Lowe's (NYSE: LOW), you've probably noticed that the cost of building materials, especially lumber, has been increasing rapidly over the past few years. No, it's not your imagination. And the culprit, rather than the sometimes-speculated-about reconstruction in Iraq, seems to be other parts of Asia, particularly China.
The fact is, there's a lot of growth afoot in Asia. A recent Bangkok Post article estimated that Thailand's demand for building materials is expected to grow by 25% to 30% over this year. The story profiled the nation's largest sugar-producing company, which is shifting its focus toward manufacturing particle board, a material that it expects will make up half of its revenues within seven years.
Besides shortages and the rising prices of framing lumber and cement, roofing shingles have also been in shorter-than-usual supply. The reason? Many cite the large amount of roof work being done in Florida, following the state's recent spate of hurricanes. Likewise, Asia's tsunami will probably also boost demand for building materials across ravaged parts of the continent.
In an odd aside, it seems there's also a shortage of waste containers. Roofers have been hogging a lot of them, making it hard for other construction professionals to reserve them.
Is there any good news from an investor's point of view? Well, yes. Investors in firms such as Cemex (NYSE: CX), Mexico's largest cement producer, may rejoice. Cemex has been performing well lately, partly because it's been able to hike its prices. (Did you know, by the way, that cement and concrete aren't the same thing? Cement is a component of concrete, along with water and stone and/or sand.)
Fools with plans to build their own homes may be relieved to know that the shortage of home-building materials recently ebbed. But even so, prices are expected to rise by 8% to 9% annually for the near future. A CBS MarketWatch article noted: "In the year from July 2003 to July 2004, rising building-materials prices added about $6,500 to the cost of an average new home in the United States, a home that sold for about $280,000."
If you're planning to build, doing so sooner rather than later may be a good idea. Or at least figure in expected increases in materials costs. If you're investing, take some time to investigate firms that make construction materials. Learn more in these articles:
Visit our Home Center to learn more about buying, selling, and maintaining a home -- and find special mortgage rates. You can also visit our Building/Maintaining a Home or Buying or Selling a Home discussion boards, to get some great insights and tips from fellow Fools.
Longtime Fool contributor Selena Maranjian owns shares of Home Depot. The Fool has a disclosure policy.
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