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Housing’s Share of the Economy Remains Level with Positive Signs from Residential Investment

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Housing’s share of the economy remained unchanged at 16.2% in the fourth quarter of 2024, according to the advance estimate of GDP produced by the Bureau of Economic Analysis. For the year, housing’s share of the economy was 16.2%, up from 16.0% in 2023 and down from 16.5% in 2022.

The more cyclical home building and remodeling component – residential fixed investment (RFI) – was 4.0% of GDP, level with the previous quarter. The second component – housing services – was 12.2% of GDP, also level with the previous quarter. The graph below stacks the nominal shares for housing services and RFI, resulting in housing’s total share of the economy.

Housing service growth is much less volatile when compared to RFI due to the cyclical nature of RFI. Historically, RFI has averaged roughly 5% of GDP while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. These shares tend to vary over the business cycle. However, the housing share of GDP lagged during the post-Great Recession period due to underbuilding, particularly for the single-family sector.

In the fourth quarter, RFI added 21 basis points from the headline GDP growth rate in the fourth quarter of 2024, a welcomed result as RFI previously had two consecutive quarters of negative contributions to GDP. The Federal Reserve, while keeping unchanged this month, lowered the federal funds rate by 100 basis points in September and December of 2024. This likely improved financing conditions for many builders, leading to RFI’s growth in the fourth quarter. A notable observation from the fourth quarter release was nonresidential fixed investment (similar to RFI, but for nonresidential structures) negatively contributed 31 basis points to GDP growth, the first negative effect on the economy for nonresidential fixed investment in over three years.

Housing services added 17 basis points (bps) to GDP growth.  Among household expenditures for services, housing services contributions were the fourth-highest contributor to headline GDP growth behind health care (46 bps), other services (31 bps) and financial services and insurance (18 bps).

Overall GDP increased at a 2.3% annual rate, down from a 3.1% increase in the third quarter of 2024, and down from a 3.0% increase in the second quarter of 2024. Headline GDP growth in 2024 was 2.8%, down slightly from 2.9% in 2023 but up from 2.5% in 2022.

Housing-related activities contribute to GDP in two basic ways:

The first is through residential fixed investment (RFI). RFI is effectively the measure of home building, multifamily development, and remodeling contributions to GDP. RFI consists of two specific types of investment, the first is residential structures. This investment includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes, brokers’ fees and some types of equipment that are built into the structure. RFI’s second component, residential equipment, includes investment such as furniture or household appliances that are purchased by landlords for rental to tenants.

For the fourth quarter, RFI was 4.0% of the economy, recording a $1.200 trillion seasonally adjusted annual pace. RFI grew 5.3% at an annual rate in the fourth quarter after falling 4.4% in the third. Among the two types of RFI, real investment in residential structures rose 5.3% while for residential equipment it rose 4.9%. Investment in residential structures stood at a seasonally adjusted annual pace of $1.178 trillion, making its share of residential investment far greater than that of residential equipment, which was at seasonally adjusted annual pace of $21.5 billion.

The second impact of housing on GDP is the measure of housing services. Similar to the RFI, housing services consumption can be broken out into two components. The first component, housing, includes gross rents paid by renters, owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units), rental value of farm dwellings, and group housing. The inclusion of owners’ imputed rent is necessary from a national income accounting approach, because without this measure, increases in homeownership would result in declines in GDP. The second component, household utilities, is composed of consumption expenditures on water supply, sanitation, electricity, and gas.

For the fourth quarter, housing services represented 12.2% of the economy or $3.625 trillion on a seasonally adjusted annual basis. Housing services grew 1.4% at an annual rate in the fourth quarter. Real person consumption expenditures for housing also grew 1.4%, while household utilities expenditures grew 1.6%. At the seasonally adjusted annual pace, housing expenditures was $3.166 trillion and household utility expenditures stood at $458.9 billion in seasonally adjusted annual rates.

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U.S. Metro Areas in 2023: Real GDP, Construction, and Real Estate Insights

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Real GDP of metropolitan areas rose 2.7% in 2023, with the “real estate, rental and leasing” sector contributing 0.34 percentage points and construction contracting growth by 0.11 percentage points. While many metro areas followed the national growth trend, each region has its unique economic narrative. This article explores the economic trends driving these outcomes, focusing on the leading metro areas in real GDP growth, the construction sector’s standout performers over a five-year period, and the top MSAs benefiting from growth in real estate, rental, and leasing.

In 2023, real GDP increased in 348 Metropolitan Statistical Areas (MSAs), decreased in 34 MSAs, and remained unchanged in 3 MSAs, according to the U.S. Bureau of Economic Analysis (BEA). The data, which was recently released in December 2024, shows the range of growth spanned from 42.9% in Midland, TX, to a contraction of -9.3% in Elkhart-Goshen, IN. Three MSAs—Ithaca, NY, Joplin, MO, and Longview, WA—saw no change in real GDP.

The oil and gas sector played a significant role in driving growth in many MSAs. Midland, TX, recorded the highest growth due to a surge in oil production, with the “mining, quarrying, and oil and gas extraction” industry contributing a hefty 41.2 percentage points to the metro area’s GDP growth. Furthermore, among the top five highest growth areas, four had this industry as the leading contributor.

Top Five MSAs by Real GDP Growth and Leading Contributing Industry

Metro Area2023 Real GDP Growth (%)Largest Contributing IndustryContribution (Percentage Points)Midland, TX42.9Mining, quarrying, and oil and gas extraction41.2Greeley, CO18.5Mining, quarrying, and oil and gas extraction15.5El Centro, CA16.4Agriculture, forestry, fishing, and hunting14.4Odessa, TX11.6Mining, quarrying, and oil and gas extraction7.1Wheeling, WV-OH10.7Mining, quarrying, and oil and gas extraction9.9

Construction Sector Growth (2018–2023)

From 2018 to 2023, the construction industry exhibited a mixed performance, with 140 MSAs reporting positive compound annual growth rates (CAGR), 188 recording declines, and 5 showing no change. States like Idaho, Arizona, and Florida emerged as hotspots for construction growth during this period while states in the East North Central division appear to have slowdowns in this sector.

Elizabethtown-Fort Knox, KY, led with a 14.4% CAGR in construction. This boom was primarily driven by the development of the BlueOval SK Battery Park, slated to begin production in 2025. This joint venture between Ford Motor Company and SK On, a South Korean electric vehicle (EV) supplier, is expected to be the largest EV battery manufacturing facility globally.

According to a study by the Hardin County Chamber of Commerce (HCCC), the project is estimated to:

Generate $1.6 billion in construction payroll.

Create 5,000 jobs by the end of 2025.

Require 3,100 additional housing units to accommodate new workers.

Top Five MSAs for Construction Growth (2018–2023):

Metro AreaCAGR (%)Average Contribution (Percentage Points)Elizabethtown-Fort Knox, KY14.40.45Clarksville, TN-KY10.80.03Punta Gorda, FL10.61.12Jacksonville, NC10.20.32The Villages, FL10.11.23

Real Estate, Rental, and Leasing Growth (2018–2023)

The real estate, rental, and leasing sector also showed robust growth in many regions, with 209 MSAs experiencing positive growth during the five-year period. The Villages, FL, recorded the highest CAGR at 14.1%, reflecting its status as the nation’s largest community designed for an aging population.

Other MSAs like Jonesboro, AR, saw significant real estate growth due to proximity to Arkansas State University, while Austin-Round Rock-Georgetown, TX, benefited from a population influx because of its thriving tech economy.

Top Five MSAs for Real Estate Growth (2018–2023):

Metro AreaCAGR (%)Average Contribution (Percentage Points)The Villages, FL14.13.6Jonesboro, AR12.11.2Twin Falls, ID10.81.1Austin-Round Rock-Georgetown, TX10.71.4El Centro, CA10.60.6

Visit NAHB’s dashboard for additional data and visualizations on demographics, housing market and the economy for all metro areas.

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Housing Inflation Moderates Amid Higher Energy Costs

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Inflation edged up to a five-month high in December as energy prices surged, accounting for more than 40% of the monthly headline increase. Inflation ended 2024 at a 2.9% rate, down from 3.4% a year ago, although the last mile to the Fed’s 2% target continues to be challenging. While core inflation remained stubborn due to elevated shelter and other service costs, housing costs showed signs of cooling – the year-over-year change in the shelter index remained below 5% for a fourth straight month and posted its lowest annual gain since January 2022, suggesting a continued moderation in housing inflation.

While the Fed’s interest rate cuts could help ease some pressure on the housing market, its ability to address rising housing costs is limited, as these increases are driven by a lack of affordable supply and increasing development costs. In fact, tight monetary policy hurts housing supply because it increases the cost of AD&C financing. This can be seen on the graph below, as shelter costs continue to rise at an elevated pace despite Fed policy tightening. Additional housing supply is the primary solution to tame housing inflation.

Furthermore, the election result has put inflation back in the spotlight and added additional   risks to the economic outlook. Proposed tax cuts and tariffs could increase inflationary pressures, suggesting a more gradual easing cycle with a slightly higher terminal federal funds rate. However, economic growth could also be higher with lower regulatory burdens. Given the housing market’s sensitivity to interest rates, a higher inflation path could extend the affordability crisis and constrain housing supply as builders continue to grapple with lingering supply chain challenges. During the past twelve months, on a non-seasonally adjusted basis, the Consumer Price Index rose by 2.9% in December, according to the Bureau of Labor Statistics’ report. This followed a 2.7% year-over-year increase in November. Excluding the volatile food and energy components, the “core” CPI increased by 3.2% over the past twelve months, after holding steady at 3.3% for three months. The component index of food rose by 2.5%, while the energy component index fell by 0.5%.

On a monthly basis, the CPI rose by 0.4% in December on a seasonally adjusted basis, after a 0.3% increase in November. The “core” CPI increased by 0.2% in December, after rising  0.3% for three consecutive months.

The price index for a broad set of energy sources rose by 2.6% in December, with increases across all categories including gasoline (+4.4%), fuel oil (+4.4%), natural gas (+2.4%) and electricity (+0.3%). Meanwhile, the food index rose 0.3%, after a 0.4% increase in November. Both indexes for food away from home and food at home increased by 0.3%.

The index for shelter (+0.3%) was the largest contributor to the monthly increase in all items index, accounting for nearly 37% of the total increase. Other top contributors that rose in December include indexes for airline fares (+3.9%), used cars and trucks, (+1.2%) and new vehicles (+0.5%). Meanwhile, the index for personal care (-0.2%) was among the few major indexes that decreased over the month. The index for shelter makes up more than 40% of the “core” CPI, rose by 0.3% in December, the same increase last month. Both indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.3% over the month. Despite the moderation, shelter costs remained the largest contributors to headline inflation.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than overall inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). In December, the Real Rent Index rose by 0.1%. Over the twelve months of 2024, the monthly growth rate of the Real Rent Index averaged 0.1%, slower than the average of 0.2% in 2023.

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Residential Construction Inputs Price Growth Slows in 2024

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Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were unchanged in December according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. This index grew 0.8% over 2024, the lowest yearly increase in the index since its inception in 2014.

The inputs to the new residential construction price index can be broken into two components—one for goods and another for services. The goods component increased 1.7% over the year, while services decreased 0.4%. For comparison, the total final demand index increased 3.3% in 2024, with final demand with respect to goods up 1.8% and final demand for services up 4.0% over the year.

Input Goods

The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. The price of input goods to new residential construction was down 0.1% in December from November. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index.

The price of goods used in residential construction grew 1.7% in 2024, slightly higher than the growth in 2023 of 1.0%. This growth can be attributed to the rise in the prices of building materials, which grew 2.2% in 2024. The price of energy inputs fell for the second straight year, down 5.3% in 2024.

At the individual commodity level, the five commodities with the highest importance for building materials to the new residential construction index were as follows: ready-mix concrete, general millwork, paving mixtures/blocks, sheet metal products, and wood office furniture/store fixtures. Across these commodities, there was price growth for most commodities in 2024 except for sheet metal products. Ready-mix concrete was up 5.1%, wood office furniture/store fixtures up 4.3%, general millwork up 2.5%, paving mixtures/blocks up 2.3% while sheet metal products were down 0.2%. The commodity used in new residential construction the featured the highest price growth in 2024 was softwood lumber, not edge worked, which increased 14.7% in 2024. The commodity where prices declined the most was No. 2 diesel fuel, down 13.9%.

Input Services

Prices of inputs to residential construction for services were up 0.5% in December from November. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component. The most significant component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was down 1.8% in 2024 after growing 5.8% in 2023.  Across individual services, credit deposit services advanced the most in 2024, up 21.2% over the year while the prices for metal, mineral and ore wholesaling services fell the most, down 19.2%.

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U.S. Population Grows at Highest Rate Since 2001

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According to the U.S. Census Bureau’s latest estimates, the U.S. resident population grew by 3,304,757 to a total population of 340,110,988. The population grew at a rate of 0.98%, the highest rate since 0.99% in 2001. This also marked the third straight increase in the growth rate of the U.S. population. The vintage population estimates are released annually and represent the change in the U.S. population between July 1st of 2023 and 2024.

The Census Bureau reports that the primary source of population growth was net international migration (immigration), as international migration levels once again were higher than the previous year. The level of net international migration between 2023 and 2024 was 2,786,119. The second component of population growth is natural growth, which represents births minus deaths. Births totaled 3,605,563, down slightly from last year, while the number of deaths was reported at 3,086,925, also a decrease from last year. The natural growth, therefore, between 2023 and 2024 was 518,638.

Each region in the U.S. experienced population growth for the 2023-2024 period. The South led in population growth at 1.34% followed by the West at 0.85%. Meanwhile, the Midwest population grew 0.75%, while the Northeast grew the least at 0.59%.  

At the State level, 47 States and the District of Columbia had a population increase over the year. Of note, D.C. had the highest growth rate at 2.13%. Florida was second with population growth at 2.00% followed by Texas at 1.80%. Numerically, Texas experienced the largest population increase gaining 562,941. This was followed by Florida at 467,347 and California at 232,570.

Only three states lost population or remained level according to Census estimates. Vermont and West Virginia tied with a decline of 0.03%. Meanwhile Mississippi saw no population change.

California remained the most populous state by a healthy margin. California’s population was at 39,198,693, while the next most populous state was Texas at 31,290,831. To round out the top five States by total population the proceeding highest were Florida (23,372,215), New York (19,867,248), and Pennsylvania (13,078,751).

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Consumer Confidence Dips Amid Economic Outlook

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Consumer confidence fell to a three-month low in December amid growing concerns about economic uncertainties, especially potential tariffs. These policy changes could derail inflation progress and lead the Fed to slow its easing pace.

The Consumer Confidence Index, reported by the Conference Board, is a survey measuring how optimistic or pessimistic consumers feel about their financial situation. This index fell from 112.8 to 104.7 in December, the largest monthly decline since August 2021. The Consumer Confidence Index consists of two components: how consumers feel about their present situation and about their expected situation. The Present Situation Index decreased 1.2 points from 141.4 to 140.2, and the Expectation Situation Index dropped 12.6 points from 93.7 to 81.1, just above the 80 threshold. Historically, an Expectation Index reading below 80 often signals a recession within a year.

Consumers’ assessment of current business conditions turned negative in December. The share of respondents rating business conditions “good” decreased by 2.5 percentage points to 19.1%, while those claiming business conditions as “bad” rose by 1.4 percentage points to 16.7%. However, consumers’ assessments of the labor market improved. The share of respondents reporting that jobs were “plentiful” rose by 3.4 percentage points to 37%, and those who saw jobs as “hard to get” decreased by 0.4 percentage points to 14.8%.

Consumers were less optimistic about the short-term outlook. The share of respondents expecting business conditions to improve fell from 24.7% to 21.7%, while those expecting business conditions to deteriorate rose from 15.9% to 18.3%. Similarly, expectations of employment over the next six months were less positive. The share of respondents expecting “more jobs” decreased by 3.7 percentage points to 19.1%, and those anticipating “fewer jobs” climbed by 3.4 percentage points to 21.3%.

The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home fell to 4.9% in December. Of those, respondents planning to buy a newly constructed home decreased to 0.4%, and those planning to buy an existing home dropped to 2.2%.

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2024 Third Quarter State-Level GDP Data

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Real gross domestic product (GDP) increased in 45 states and the District of Columbia in the third quarter of 2024 compared to the second quarter of 2024 according to the U.S. Bureau of Economic Analysis (BEA). Iowa reported no change during this time. The percent change in real GDP ranged from a 6.9 percent increase at an annual rate in Arkansas to a 2.3 percent decline in North Dakota.

Nationwide, growth in real GDP (measured on a seasonally adjusted annual rate basis) increased 3.1 percent in the third quarter of 2024, which is roughly the same as the second quarter level of 3.0 percent. Retail trade, health care and social assistance, and information were the leading contributors to the increase in real GDP across the country.

Regionally, real GDP growth increased in all eight regions between the second and the third quarter. The percent change in real GDP ranged from a 3.9 percent increase in the Southwest region (Arizona, New Mexico, Oklahoma, and Texas) to a 1.4 percent increase in the Plains region (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota).

At the state level, Arkansas posted the highest GDP growth rate (6.9 percent) followed by Alabama (6.0 percent) and Mississippi (5.1 percent). On the other hand, three out of the seven states that makes up and Plains region, South Dakota (-0.8 percent), Nebraska (-1.4 percent), and North Dakota (-2.3 percent) along with Montana (-0.1 percent) posted an economic contraction in the third quarter of 2024.

The agriculture, forestry, fishing, and hunting industry increased in 25 states, was the leading contributor to growth in five states including Arkansas, Alabama, and Mississippi, the states with the largest increases in real GDP. In contrast, this industry was the leading offset to growth in 14 states including North Dakota, Nebraska, South Dakota, and Montana, the only states with declines in real GDP.

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Property Taxes Revenue Surpasses $200 Billion

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State & local tax revenue from property taxes paid reached $203.9 billion in the third quarter of 2024 (seasonally adjusted), according to the Census Bureau’s quarterly summary of state & local tax revenue. This marks a 2.8% increase from the revised $198.3 billion in the second quarter of 2024 and also marks the first quarter where property tax revenue topped $200 billion for state & local governments. Year-to-date, total state & local tax revenue was $1.56 trillion. This was 5.4% higher than the $1.48 trillion through the first three quarters of 2023.

The 2.8% quarterly increase in the property tax revenue was up from the previous quarter of 2.6%. Property tax revenues have grown at an average rate of 0.87% from 2009 to 2024.  This quarter marks the fourth consecutive quarter of above average growth.

Year-over-year, property tax revenue was 11.2% higher, a notable uptick from the 8.0% increase in the previous quarter. The average year-over-year growth rate from 2010 to 2024 is 3.60%. The last time yearly growth was below the average was the 1.1% decline in the third quarter of 2022.

Of total state & local collections in the third quarter, property tax made up the largest share at 38.2%, followed by sales tax at 27.3%. Individual income tax represented 26.0% of tax revenue, while corporate tax made up the remaining 8.5% for state & local revenues in the third quarter of 2024.

Over the past decade, state & local governments have been most reliant on property taxes for revenue. Sales tax has had an increased importance since 2023, when the share of sales tax of total revenues grew above individual income tax shares. See the chart below for the trends of total state & local government tax revenue shares.

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U.S. Trade Deficit: Balancing Act Still Yet to Appear

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The U.S. trade deficit in goods was at $112 billion in the month of October, according to the Census Bureau’s Foreign Trade data. Compared to last year, the level has increased 13.3%, rising from $99 billion.

Total goods imported was valued at $289 billion while the exports were valued at $177 billion in October. The import value represents the price paid for goods at the foreign port, excluding U.S. import duties, freight, insurance, and other charges. This value includes all merchandise, whether it is sold directly into the U.S. market or re-exported to another country. The export value represents the selling price of the goods plus inland/domestic freight, insurance and other charges at the U.S. port, excluding post-export charges.

As shown above, the U.S. trade deficit in goods has continued to climb higher since 2014 when it was $59 billion. Focusing on October 2024 data, the Census reports that of the 229 countries the U.S. traded goods in October, the U.S. had a trade deficit with 102 (meaning the U.S. imported more than exported to specific country). The countries that the U.S. had the largest trade deficit with in October were China ($28.0 billion), Mexico ($16.4 billion) and Vietnam ($11.6 billion). Shown below are five countries that have the highest average trade deficit with the U.S. since 2014.

Tracking the dashed trend lines above, the trade deficit with China has moved lower since peaking in 2018. Despite this recent decline, the trade deficit between China and U.S. remains significantly higher than any other country. In October, it was almost double the size of the deficit with Mexico, the second largest. The trade deficit with Mexico and the U.S. has trended upward as trade policy in the U.S. has shifted away from China. The total value of imports from Mexico in October was $45.5 billion, while imports from China stood at $41.5 billion. There also exists a notable increase in the trade deficit with Vietnam. In January 2014, the level stood at only $2 billion, well below other main exporters to the U.S. like Japan and Germany. This level has only continued to rise, caused again by a shift away from trade with China.

The top countries in October that the U.S. held a trade surplus with were Netherlands ($4.5 billion), United Kingdom ($1.7 billion) and the Hong Kong ($1.6 billion). While these were the highest surplus counties in October, the values are substantially lower than the trade deficit levels shown above. The graph below displays five countries that the U.S. has the largest average trade surplus with over the past 10 years. The surplus with the Netherlands has jumped far higher than any nation since 2022. Trade with Hong Kong historically had the highest until 2018-2019.

While the U.S. has consistently held a trade deficit since 2014, the composition of the deficit is continuing to undergo a transition. Despite a U.S. trade policy that is shifting away from China, the trade deficit with China remains by far the largest the U.S. has with any country. Expansion of trade with Mexico and Vietnam has a seen a rise in trade deficits with both nations, as the U.S. attempts to decouple with China. The data shows that both economies are still very connected, with the U.S. remaining a top destination of exportation from China and U.S. consumers needs for goods from China.

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Building Material Prices Increase in November Led by Lumber

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Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were unchanged in November according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. Compared to a year ago, this index was up 0.7% in November after rising 0.3% in October.

The inputs to the new residential construction price index can be broken into two components­—one for goods and another for services. The goods component increased 1.2% over the year, while services decreased 0.3%. For comparison, the total final demand index increased 3.0% over the year in November, with final demand with respect to goods up 1.1% and final demand for services up 3.9% over the year.

Goods

The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. The price of input goods to new residential construction was unchanged in November from October. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index.

Prices for inputs to residential construction, goods less energy, were up 2.3% in November compared to a year ago. This year-over-year increase was larger than in October (2.0%) and was the largest year-over-year increase since June earlier this year. The growth rate in November 2023 was 1.2%. The index for inputs to residential construction for energy fell 10.9% year-over-year in November, the fourth straight yearly decline in input energy prices.  

The graph below focuses on the data since the start of 2023 for residential goods inputs. Energy prices have continued to fall over the past year, with only two periods of growth in 2024.

At the individual commodity level, excluding energy, the five commodities with the highest importance for building materials to the new residential construction index were as follows: ready-mix concrete, general millwork, paving mixtures/ blocks, sheet metal products, and wood office furniture/store fixtures. Across these commodities, there was price growth across the board compared to last year. Ready-mix concrete was up 3.9%, wood office furniture/store fixtures up 3.4%, general millwork up 2.8%, paving mixtures/blocks up 1.6% and sheet metal products up 0.5%. Unsurprisingly, given how energy prices have trended this year, the input commodity that had the largest fall in price over the year was No. 2 diesel, which was down 20.6%.

Among lumber and wood products, the commodities with the highest importance to new residential construction were general millwork, prefabricated structural members, softwood veneer/plywood, softwood lumber (not edge worked) and hardwood veneer/plywood. The input commodity in residential construction that had the highest year-over-year percent change (across all input goods) in November was softwood lumber (not edge worked), which was 13.7% higher than November 2023. This is of particular note because none of the other top wood commodities had a year-over-year change above 3% in November. Lumber supplies have been driving prices higher over the past month as the sawmill industry continues to adjust to the mill closures that occurred earlier this year. Higher lumber demand as residential construction rebounds due to lower interest rates is likely to continue to increase lumber prices.

Services

Prices of inputs to residential construction for services, were unchanged in November from October. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component. The most significant component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, compared to last year was down 1.2% in November after declining 1.5% in October.

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