May 2017 Whole House Commodity Index

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Whole House Commodity Index 
May 2017  -  By Don Magruder

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for May 2017 slightly retreated from April as builders and suppliers digested the huge year-over-year increase in lumber and sheathings.  The declines in commodities could be an indicator of weakening demand as cost erodes the affordability of new projects.  The next few months will test this theory as additional lumber tariffs are in the offering at the end of June.  At some point, will builders move from Western Canadian spruce to pine as so many pine producers had hoped for—we will see.

Over the last 30 days, the Index dropped 0.3 percent to $32,796.99, with most non-commodity items remaining steady and looking for some sort of market direction.
The following items were the notable price movers in this month’s Index:

  1. CDX pine plywood dropped 1.0 percent while OSB sheathings added a small 0.5 percent gain.
  2. 2x4 pine declined 3.1 percent while 2x6 and 2x12 pine gave back on average 6.0 percent.
  3. 2x4 dimensional spruce was down 3.1 percent while 2x6 spruce gave back 5.1 percent.
  4. Oddly, 2x4-92 5/8 spruce studs managed to add 1.0 percent.
  5. Decreases in pine pricing resulted in a minor 0.8 percent decline in truss pricing.
  6. Metal foundation rebar added 3.5 on higher import duties and a belief most of the cheap bar on the ground is depleted.
  7. Colonial casing was up 4.3 percent on increased pricing from exports.

At this point, the concern for additional tariffs should be spooking the markets.  I have yet to see any of this.  Maybe the extra costs are baked in or maybe builders and suppliers have become ambivalent to the continuous price increases.  These would be better reasons than softening housing demand.
The politicians in Washington, D.C. need to tap down the bickering and chaos somewhat or that along with inflationary pricing could begin to erode housing demand.  Affordability and political chaos at this point seem to be the two biggest threats to the housing market. 

Let’s see if the spring pricing increases have the legs to run into summer.  At this point, I am skeptical.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index is based on wholesale costs of the base components to build a 2,200 square foot wood frame home with a concrete stem wall in Central Florida.  The Index includes foundation, metal, concrete, block, stucco, cement, wood framing, siding, sheathings, trusses, roofing, drywall, insulation, windows, doors, trim, garage doors, and most building hardware.  It does not include décor, electrical, plumbing, mechanical, landscaping, or labor.  Because the Index uses current wholesale costs, this should be a strong indicator of the direction of building prices for the next 30-45 days.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida.  Go to www.romaclumber.com to sign-up for the Index and other free market reports.  To sign-up for this information via email, contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. .

April 2017 Whole House Commodity Index

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Whole House Commodity Index 
April 2017  -  By Don Magruder

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for April 2017 hit an all-time high as fears of the countervailing duty ramifications fallout from the Canada-United States Softwood Lumber Agreement decisions spook markets.  Importers of Canadian spruce fear that heavy duties could be in the near-term, with claw-backs for lumber shipped months ago.  Some mills are off the market while others are adding premiums on orders shipped to the United States. 

Based on other factors in the market, it appears demand in housing is not totally fueling these increases. As with steel earlier in the year, fear of a trade policy is driving the price and discussion.

Since last month, the Index increased 1.6 percent to $32,796.99, and 5.0 percent since the first of the year.  As compared to April 2016, the Index is up 8.8 percent, which can be devastating to builders who are hesitant to increase home pricing.  Keep in mind, this Index represents the structural components to build a home and has nothing to do with labor increases in the field.  Many would argue that labor has increased more than 8.8 percent and this does not take into account the general increases in fixed overhead for most companies.  The point is simple—builders must increase the price of their homes to stay viable.

The following items were the notable price movers in this month’s Index:

  1. Wire mesh dropped 1.9 percent while rolled 6 mil foundation plastic jumped 4.5 percent.
  2. Boxed felt nails were up 1.7 percent on increased steel pricing.
  3. Yellow pine lumber traded in a very narrow range with 2x4-16 up 1.0 percent, 2x6-16 up 3.7 percent, and 2x12-16 down 1.7 percent.  Pine usually follows the spruce market if demand is the sales driver.
  4. 2x4-92 5/8” #2 spruce studs were up 14.7 percent while dimensional 2x4-16 #2 spruce added 14.6 percent.  These are heavy increases for one month.
  5. 2x6-16 #2 spruce added 12.0 percent and most wider-width spruces had similar increases.
  6. 4x4-8 treated posts added 2.8 percent on higher mill pricing.
  7. Cement siding added 4.0 percent on increased pricing from the manufacturer.
  8. Trusses added 0.5 percent on increased pine pricing for higher quality grades.

Roofing, drywall, insulation, windows, and doors as well as most other building material items were flat.  This indicates to me that demand remains unimpressive.

In last month’s report, I cautioned that a quick turnaround in the markets could occur and I suggested that builders incorporate a Price Adjustment Clause in their construction contracts.  Included in the report was a copy of the clause we created that ties back to our Index.  After the last few weeks of increases, incorporating this clause in contracts appears to be a good move.

Once the Canada-United States Softwood Lumber Agreement is resolved there will be a few weeks of fallout, but ultimately demand will drive this pricing boat again.  Markets go up and down, but if housing does not kickoff strong quickly, I expect lumber pricing to ease.  It is very prudent for builders, especially custom builders, to have a Price Adjustment Clause in their contracts because the markets are just too unpredictable this year.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index is based on wholesale costs of the base components to build a 2,200 square foot wood frame home with a concrete stem wall in Central Florida.  The Index includes foundation, metal, concrete, block, stucco, cement, wood framing, siding, sheathings, trusses, roofing, drywall, insulation, windows, doors, trim, garage doors, and most building hardware.  It does not include décor, electrical, plumbing, mechanical, landscaping, or labor.  Because the Index uses current wholesale costs, this should be a strong indicator of the direction of building prices for the next 30-45 days.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida.  Go to www.romaclumber.com to sign-up for the Index and other free market reports.  To sign-up for this information via email, contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. .

March 2017 Whole House Commodity Index

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Whole House Commodity Index 
March 2017 By Don Magruder

If the commodity market could have a psychiatric analysis, there is little doubt the current market would be diagnosed with anxiety and bi-polar disorders, with big mood swings that change with the weather. Thirty days ago, with the expiration of the United States-Canadian Softwood Lumber Agreement, the wood commodity market was in a panic. The market was anxious about the trade policies of the new Administration and was very excited and busy with an unexpected mild, warm winter. Prices were going up quickly and many thought the run was going to last.

A month later, spruce pricing is dropping because buyers refused to stock the wagon with the high priced lumber, the anxiety over the Softwood Agreement and new Administration subsided, and winter decided to make a late season curtain call. Another factor that no one wants to admit is that demand is not taking off as expected. In addition, higher interest rates and increasing building costs are having a negative effect on the market; and every year the Northern areas have a mild winter, the building season runs out of pricing legs, usually by late April or early May.

The Ro-Mac Lumber Whole House Commodity Index dropped an unimpressive 0.1 percent to $32,294, as advancers and decliners offset one another. The two headlines in pricing are the decline in spruce lumber and the minor market adjustments in drywall and roofing. I am not sure if the roofing and drywall manufacturers have the discipline to hold announced pricing in the face of inventories sitting on the ground and volatile sales.

The notable price movers on the Index for mid-March as compared to February are:

  • Dimensional pine lumber joined the price increase party late and, over the last 30 days, 2x4 pine added 2.0 percent, 2x6 pine jumped 3.3 percent, and 2x12 pine led the way with a 6.6 percent increase.

  • Both 2x4 and 2x6 #2 spruce lumber gave back 7.6 percent, as buyers resisted the higher prices and anxiety waned.

  • As mills searched for buyers, 2x4x92 5/8 #2 spruce studs dropped 6.0 percent.

  • Truss prices gave back 0.7 percent - basically flat.

  • CDX pine plywood added 4.0 percent and OSB sheathing added 4.2 percent, or almost 50 cents per sheet.

  • Treated 4x4-8 posts were up 5.2 percent on seasonal demand, while treated 2x4s were up almost 2.0 percent.

  • The wood engineered beam for our home was up 5.2% on announced price increases.

  • The shingles market adjusted downward to less than 2.0 percent while drywall followed with its own 2.0 percent drop.

  • Announced window increases hit in March, lifting window pricing by 5.0 percent.

  • Rebar pricing traded 3.4 percent down, but all are warning this is just secondary suppliers pushing out the product.  New steel is going to be higher because of new tariffs on imports from Turkey.

It remains to be seen if the spruce markets are in retreat or regrouping for another spring run.

Unless there is a spring pop in construction, the chance of another spruce run in the next few weeks is very slim. A week of winter weather has stopped building in a large section of the country, but mills are still cutting wood. This supply has to be sold and cleared before pricing can go up. I also believe that suppliers will stare down mills as long as they can before buying. Now, some mill people believe that once the weather breaks and the suppliers have to reload their wagons, prices will resume their run. I am just not buying that right now. The little retreats in other building products suggest an uneasiness in demand.

Builders should remain wary on long-term pricing until there is more clarity, especially until the Softwood Tariff Agreement and the trade issues with steel are resolved. Labor shortages and wage increases appear to outweigh any pricing concerns at this point.

We had a lot of builders and contractors ask us about the Price Escalation Clause Ro-Mac Lumber developed for builders, which is tied to our Whole House Commodity Index. We have decided to include it for your review at the bottom of this report. As usual, we suggest you seek your own legal advice before adding it to your contract.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index is based on wholesale costs of the base components to build a 2,200 square foot wood frame home with a concrete stem wall in Central Florida.  The Index includes foundation, metal, concrete, block, stucco, cement, wood framing, siding, sheathings, trusses, roofing, drywall, insulation, windows, doors, trim, garage doors, and most building hardware.  It does not include décor, electrical, plumbing, mechanical, landscaping, or labor.  Because the Index uses current wholesale costs, this should be a strong indicator of the direction of building prices for the next 30-45 days.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida. Go to www.romaclumber.com to sign-up for the Index and other free market reports.  To sign-up for this information via email, contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. . 


Price Adjustment Clause for Contract

If the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (“Index”) released for the month preceding the date of this contract increases by more than 5%, then the amount of the contract shall be increased by taking the percentage of increase of the Index and multiplying same by 22% of the total contract price. For example, if this contract was for $150,000 and the Index increased by 5% prior to the termination of this contract, then this contract will be increased by $1,650.00. This is determined by taking 22% of the contract price, or $33,000.00, and multiplying it by the 5% increase, which produces the $1,650.00.

(Please note, the 5% Index increase factor can be adjusted up or down by the builder to activate the clause)

Information About The Clause – Do Not Include In Contract

  1. The clause was developed by Leesburg attorney, H. D. Robuck, Jr., Esquire. This is not intended to give legal, accounting, or business advice. You should contact your own attorney, certified public accountant, or business advisor.
  2. The Ro-Mac Lumber Whole House Commodity Index originated in April 2005. Ro-Mac releases the Index to the public monthly, which represents the current weighted cost for structural commodity items to build a 2,200 square foot frame house on a stem wall.
  3. The Index is based on current replacement wholesale and manufacturing costs to give prospective buyers a preview of commodity pricing for the next 45 days.
  4. The Index includes foundation steel, concrete blocks, cement, wood framing, sheathing, trusses, roofing, interior and exterior doors, windows, insulation, drywall, moulding, garage doors, hurricane hardware, and exterior trim.
  5. The Index does not include labor, plumbing, electrical, mechanical, appliances, décor, landscaping, or items not listed above.
  6. The 22% factor for structural commodity components was derived from local market data in Central Florida, and based on general construction and code practices of the area.
  7. Builders, remodeling contractors, and the public can be placed on the email service to receive the Index monthly by contacting Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. .
  8. Pricing and data to support the Index is available for review in person at Ro-Mac Lumber & Supply, Inc., 700 E. Main St., Leesburg, FL 34748. Ro-Mac Lumber & Supply, Inc. maintains proprietary control of the information and will not email or reproduce it for general release.

February 2017 Whole House Commodity Index

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Whole House Commodity Index 
February 2017 By Don Magruder

In last month’s Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index), I wrote the following:

"My cracked crystal ball still shows higher prices and volatility. Builders should include a price escalation clause in their contracts to protect them for periods later in the year.” 

I certainly hope builders and contractors heeded my advice because the commodity and building material markets over the last few weeks have shot straight up. 

As of mid-February 2017, the Index surged to $32,321.40, which is a whopping 3.1 percent increase in just one month and also a record high for the Index, which started in April 2005 during the construction boom.  To put it in perspective, the price of materials to build a home since the Great Housing Boom has increased 24.7 percent.  Since February 2016, the price has increased 9.7 percent.

A builder trying to eat these huge increases will probably not stay in business.  Plus most subcontractors and suppliers do not have the financial wherewithal to absorb these huge price increases.  Since last year, the cost of basic building materials to build a 2,200 square foot home referenced in this Index has increased $2,859.07.  This amount doesn’t include the huge increases in labor and workers’ compensation rates in Florida.  It also doesn’t include the price increases for electrical, plumbing, HVAC, and décor, which are not part of the Index.

The reason I am emphasizing these price increases is because I know from my company’s weekly credit reviews that many smaller builders and subcontractors cannot financially survive this type of pricing volatility without passing the cost along to the end-user.  Builders and subcontractors must get in front of these increases.

The price increases in lumber are primarily tied to the fear of huge countervailing duties or tariffs being placed on imported Canadian wood, with the expiration of the Canada-United States Softwood Lumber Agreement.  Duties on imports to America could be as much as 25 percent, with a decision appearing to be more likely coming in late spring.  However, many fear there will be a clawback provision making the duty retroactive up to 90 days.  This is forcing mills to rethink shipments this spring to the United States
at low prices.  

This market increase is being pushed by a mild winter in the northern areas that is early peeking demand for many building products.  Plus a persistent shortage of skilled labor is driving labor costs up.  Just-in-time inventories as well as weakened balance sheets in the supply chain provide less flexibility for manufacturers and suppliers to eat cost increases. 

Listed below are the major price movers in the Index since mid-January:

  • Rebar and mesh edged up just under 2 percent on supply and tariff concerns.
  • Concrete added 1.1 percent to cover increased costs.
  • CDX plywood was up 12.8 percent while OSB sheathing added 9.0 percent on increased demand.
  • 2x4-92 5/8 spruce studs added 7.6 percent, while dimensional 2x4-16 #2 spruce jumped 13.1 percent, and 2x6-16 #2 Spruce surged 18.5 percent.  Better quality Canadian lumber is more difficult to find as mills go off the market.
  • As spruce increases in price, pressure mounts on #2 yellow pine as builders look for lower cost products.  2x4-16 yellow pine is up 11.1 percent, 2x6-16 yellow pine added 12.0 percent, and 2x12-16 yellow pine soared 18.5%.
  • Treated 2x4-16 borate added 6.5 percent while 4x4-8 treated managed a 0.4 percent increase.
  • Trusses were up 3.2 percent on increased lumber costs.
  • LVLs were up 6.7 percent on a February increase from the manufacturer.
  • The annual increase in drywall has occurred.  Most drywall boards added 9.0 percent to 12.5 percent.  Whether these increase will stick or not has yet to be determined.
  • Exterior doors were up 4.0 percent on increased cost from manufacturers who are trying to cover labor and operational cost increases.

This is one heck of a list—not one item in the Index dropped in price.

What does the future hold for pricing?  Here are my concerns.

The politics in Washington, D.C. must settle down or this chaos could possibly push the country into a recession.  Business needs clarity to grow and expand.

The mild northern winter could be causing an early peek in business.  In recent years, the increased demand in housing ran out in late spring, as typical winter backlogs were built early.  I am not convinced these lumber increases have the legs to go through the summer without any countervailing duties, but who knows?

A big “pop” in pricing like this could easily exacerbate an already bad labor situation.  Framing subcontractors who do “turn-key” projects probably do not have the financial wherewithal to survive these types of increases.  Builders could lose subcontractors who just throw in the towel.

At some point, the cost of housing crosses an affordability line that hurts the industry.  I do believe that at some point the new homebuyer will cry uncle.

Finally, uncertainty is throttling business.  Threats of tariffs, duties, and busted trading partners from around the world are not good for business.  These issues need to be resolved quickly or the volatility will persist.

My best guess is that mills and manufacturers will test these new price levels through mid-March, and if demand holds up most of them will be cemented.  Lumber pricing truly depends on the Canada-United States Softwood Lumber Agreement.  If the negotiations get ugly, expect higher lumber pricing to remain until housing turns down.  The ugly truth is that we are still in a volatile market, which is being hit with cost increases from all sides, so expect inflation.

My advice remains the same as it did in January—read the first paragraph of this report.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index is based on wholesale costs of the base components to build a 2,200 square foot wood frame home with a concrete stem wall in Central Florida.  The Index includes foundation, metal, concrete, block, stucco, cement, wood framing, siding, sheathings, trusses, roofing, drywall, insulation, windows, doors, trim, garage doors, and most building hardware.  It does not include décor, electrical, plumbing, mechanical, landscaping, or labor.  Because the Index uses current wholesale costs, this should be a strong indicator of the direction of building prices for the next 30-45 days.

Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida.  Go to www.romaclumber.com to sign-up for the Index and other free market reports.  To sign-up for this information via email, contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. .

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