The Home Builders Association Wood Commodity Index (Index) for September decreased 1.8% to $337.42, as the concern last month for plywood supply, due to a mill fire in Oregon, waned. Housing starts in July were up 15.7%; however, it appears the market is struggling to hold onto that gain. According to RealtyTrac, new foreclosure filings in Florida increased 74%. This does not bode well for increased housing values, which are essential for new home appraisals.
The dimensional lumber portion of the Index was able to eke out a 0.7% increase last month. Pricing was inconsistent within the same species, because demand for specified lengths dictated the pricing direction. Pine dimensional lumber pricing increased in the narrower widths, with wider width pine firmly dropping 3.1%-8.2%. Lackluster demand, coupled with mills trying to manage inventories, created volatilities with species and sizes.
The sheathing portion of the Index firmly dropped, as the pricing drama from August gave way to unimpressive housing demand in September. Sheathings were down 4.4% to $281.20 per thousand with both OSB sheathing and CDX pine plywood mirroring very similar drops in pricing. T&G pine plywood bucked the trend in September with a 2.4% increase; however, it will be hard pressed to not have follow-up items. The real concern by many in the market is the drops in sheathing signaling a significant price adjustment. Spotty demand could usher in a period of declining prices.
Midway through September, hurricane season looks unnaturally slow and housing appears to be in the doldrums. Without an event that moves the market in a positive direction, mills and manufacturers will be forced to control supply in order to firm up the market. A plausible scenario could be that impending world events, and ensuing fears, erode consumer confidence over the next few months, causing the market to slide back to levels reminiscent of last winter.
Uncertainty abounds. Each person in the supply chain will have to decide how to most effectively manage the impending risks. For builders, at this point in time, there appears little impetus to move the market forward in price.
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