The lumber and commodity markets have tried to digest three major land-falling hurricanes in the United States over the last 30 days, which has been difficult to say the least. With each passing day in October, the threat of additional storms wane and so should the markets. Although the runup in price has been very strong, unless there is a sudden ramp up of homebuilding activity nationally these price increases will not have the legs to go further. Since mid-September, the Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) increased a whopping 10.0 percent to $440.13 per thousand. Some cracks in pricing for less popular items indicate that this price run may be waning.
The dimensional portion of the Index increased 4.6 percent to $451.80 per thousand, primarily on the popular lengths of 2x4 spruce and 2x12 pine. Short lengths of 2x4 spruce dropped almost 3.0 percent while 2x4-12’ through 2x4-16’ added 10.5 to 17.1 percent. 2x12 pine added $30-$45 per thousand, with the price going higher for longer lengths. 2x4 treated added $60 per thousand while 2x6 spruce increased almost 9.0 percent. The price reductions in shorter lengths suggest the market could be running out of steam.
The sheathing portion of the Index did not have any cracks, as all items printed higher. OSB sheathing was up $73 to $75 per thousand (or $2.40 per sheet) while CDX pine added $30-$45 per thousand. Other than 15/32” CDX most items were flowing very well to suppliers, and that price retreat may be sooner than later as we enter the holiday season.
A lot of vendors in the building material sector are feeling emboldened to announce price increases in the wake of the hurricanes, but if the building markets do not improve in regards to actual new home construction, these increases may be short-lived. For instance, a drywall manufacturer has announced a whopping 18.0 percent increase the first of January—that is a lot of money.
Just like this report indicates, certain items will begin to moderate depending on availability. Expect some normalcy to enter the market and prices to moderate by mid-November. Continued political strife in Washington, D.C. could exacerbate this pricing decline, especially if job creation continues to slow. The rough patch in pricing is probably over—just get ready for spot market volatility.
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