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Why Slowing Housing Sales May Be Good News For Developers: Falling Prices in Commodities (Wall Street Journal)
Summary: The recent fall in commodities prices, led by oil, has been a relief for developers and government builders struggling under construction inflation that has outpaced overall inflation by up to 30% in the past two years. The vibrant home construction market largely offset these costs over the period, with construction spending rising over 10% annually, but many municipal and business projects have been canceled or cut back due to runaway material costs. With petroleum a key component in building materials, metals prices falling, and a softer home construction market lessening demand, many analysts expect construction costs to fall to a level that permits development to return to more cost-efficient levels.
Related links: Full article • More on the housing market • Forget about a Soft Landing for Housing • NAR Housing Report: Declining Home Prices Induces Heavy Spin
Potentially impacted stocks and ETFs: Building materials companies who should be able to expand margins and control costs more efficiently if the trend continues -- American Standard (ASD), Illinois Tool Works (ITW), Griffon (GFF), Lennox Intl. (LII), Terex (TEX)
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