A Granular Framework for Construction Material Price Forecasting: Econometric and Machine-Learning Approaches

TL;DR

This paper introduces a granular forecasting framework for construction material prices using econometric and machine learning models, significantly improving prediction accuracy and scalability at detailed material levels.

Contribution

It develops a scalable, detailed forecasting framework leveraging CSI data and multiple models, with LSTM showing superior accuracy and incorporating macroeconomic variables.

Findings

LSTM outperforms other models with RMSE as low as 1.390.

Inclusion of explanatory variables improves model accuracy.

Framework validated across multiple CSI divisions, demonstrating scalability.

Abstract

The persistent volatility of construction material prices poses significant risks to cost estimation, budgeting, and project delivery, underscoring the urgent need for granular and scalable forecasting methods. This study develops a forecasting framework that leverages the Construction Specifications Institute (CSI) MasterFormat as the target data structure, enabling predictions at the six-digit section level and supporting detailed cost projections across a wide spectrum of building materials. To enhance predictive accuracy, the framework integrates explanatory variables such as raw material prices, commodity indexes, and macroeconomic indicators. Four time-series models, Long Short-Term Memory (LSTM), Autoregressive Integrated Moving Average (ARIMA), Vector Error Correction Model (VECM), and Chronos-Bolt, were evaluated under both baseline configurations (using CSI data only) and extended versions with explanatory variables. Results demonstrate that incorporating explanatory variables significantly improves predictive performance across all models. Among the tested approaches, the LSTM model consistently achieved the highest accuracy, with RMSE values as low as 1.390 and MAPE values of 0.957, representing improvements of up to 59\% over the traditional statistical time-series model, ARIMA. Validation across multiple CSI divisions confirmed the framework's scalability, while Division 06 (Wood, Plastics, and Composites) is presented in detail as a demonstration case. This research offers a robust methodology that enables owners and contractors to improve budgeting practices and achieve more reliable cost estimation at the Definitive level.