The Home Builders Association and Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) in December dropped for a second consecutive month, as lackluster housing demand and early cold winter breezes tapped down prices. The Index is comprised of two parts, dimensional lumber and sheathing, which are weighted in a mix frequently used in the Central Florida marketplace. The total Index dropped 3.3 percent to $320.83 per thousand, as all but three items declined. The demand portion of the equation will have a more devastating effect this close to Christmas.
Since November, the dimensional portion of the Index dropped 1.1 percent, as a general decline in pricing rippled through all sizes and species. The only three items that increased in price, did so by low single digits, and was based solely on a general need for a specific tally. Wide pine pricing was down on average 2.5 percent with spruce dimensional going from plus 1.0 percent to negative 3.4 percent, depending on size. Until mid-January there appears to be little that could change this downward trend.
The sheathing portion of the Index, which includes OSB sheathing and CDX pine plywood, retreated in full force. CDX pine plywood gave back 4.6 to 6.6 percent while OSB sheathing handed back 4.1 to 7.9 percent. Panel thickness dictated the degree of discounting, but oddly, not always was it the thicker panel that dropped the most. This is probably the best indicator of a market which is affected solely by demand. With current levels of production in OSB sheathing, expect further drops in pricing, while CDX pine plywood manufacturers will put up a stronger fight to lower pricing.
Lower fuel costs could hurt pricing in wood commodities, but that may not be all good for builders. If the markets collapse in pricing, expect mill closures and a retreat in the supply chain. This is not a good sign for a growing housing market, and could usher in more uncertainty. The next 30 days will really start to show the true weakness in the housing market.
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