I’m not very well versed in construction input prices. What makes you confident that today’s prices still reflect transitory inflation that will come down, vs the new normal that supplies have converged on?
Good question. Of all the claims I make here, my confidence is lowest about future input costs. I'm pretty confident that they have room to fall, but I doubt they will reverse all of the post-Covid inflation, and I don't have a good read on how short they will fall.
But, public homebuilders have been reporting slightly lower per-square-foot costs over the past few quarters, and they are still supply constrained in that construction times are still slightly elevated. With elevated construction times, and still elevated margins on average, I would expect inputs to still be bid up in order to book sales as quickly as possible, so the fact that costs are declining slightly even while margins remain high, tells me that there will be more room for them to move when capacity is higher. But, the range on where those numbers fall is wide.
I’m not very well versed in construction input prices. What makes you confident that today’s prices still reflect transitory inflation that will come down, vs the new normal that supplies have converged on?
Good question. Of all the claims I make here, my confidence is lowest about future input costs. I'm pretty confident that they have room to fall, but I doubt they will reverse all of the post-Covid inflation, and I don't have a good read on how short they will fall.
But, public homebuilders have been reporting slightly lower per-square-foot costs over the past few quarters, and they are still supply constrained in that construction times are still slightly elevated. With elevated construction times, and still elevated margins on average, I would expect inputs to still be bid up in order to book sales as quickly as possible, so the fact that costs are declining slightly even while margins remain high, tells me that there will be more room for them to move when capacity is higher. But, the range on where those numbers fall is wide.