July 2014 Lumber and Commodity Report
The Home Builders Association Wood Commodity Index (Index) firmed up in mid-July, as spruce and sheathing products reversed losses from the prior month. The total Index increased 6.6% to $338.51, which is significant given the hot, steamy days of summer. Whether real momentum is beginning, no one knows. However, the market's firmness may be a weak indication of a strengthening housing market, or it could be another false positive.
The wood portion of the Index increased 8.0% to $404.66 per thousand with most of the heavy increases occurring in dimensional spruce. All dimensional spruce items, including studs, increased in price. Stud price increases ranged from 4.8% to 8.3% depending upon length. Dimensional 2x4 spruce averaged increases of nearly 12% while 2x6 spruce jumped 13.2% to 16.4%. Mills doing a better job balancing supply with demand seem to be the main impetus for the increases. Pine prices dragged as rainy weather in the south seems to be tapering demand. 2x4 pine dropped nearly 3% while wider width pines gave up just under 10%. If spruce continues to strengthen, expect the pine markets to wake up.
The sheathing portion of the Index increased 5.1% to $289.10 per thousand with both CDX pine and OSB sheathing moving up. CDX pine was the firmest with prices increasing 5%-8%; OSB added on average $6 per thousand or 3% on average. The OSB market declined too much over the last quarter, and this reversal is probably a welcome sign for the housing market.
Although many builders may not like it, an increasing market is actually the best barometer of the housing market, barring extraneous events like hurricanes or other national disasters. The two challenges over the next few months will be hurricane season and momentum. Another year without a hurricane will keep the markets trading in a narrower range, while momentum will indicate a more robust economy. Builders should be wary that July may be the lowest point of the market for the next quarter, and bid accordingly.
Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at