January 2018 Whole House Commodity Index

Capture JAN-18 CHART

WHOLE HOUSE COMMODITY INDEX - January 2018

by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for January 2018 reversed two months of decreased pricing by adding 1.4 percent to $33,109.  This sets a tone that the new year could be fraught with price increases throughout the supply chain. Many in the industry are optimistic that the housing recovery in the United States, fueled by lower tax rates, will continue and should begin in earnest once the winter weather eases.  

Overall commodity and building material pricing for the fourth quarter was propped up by hurricane repairs from major storms in both Florida and Texas, as well as the Canadian-United States Softwood Agreement trade dispute.  Both appear to have a much lesser influence going into 2018, as hurricane repairs are waning and the United States finalized its duties on Canadian lumber earlier in the month.  

The primary price movers for the mid-January Index update were the following:

  • Wire mesh increased 6.4 percent and rebar added 19.4 percent as low cost imported steel evaporated out of the market place.  Continued tariffs and trade disputes in steel could accelerate pricing in 2018.
  • CDX pine plywood dropped 1.8 percent while OSB sheathing added 3.5 percent.  The winter weather and the market balancing itself are probably the best reasons for the cross in pricing.
  • Only 2x4 yellow pine dimensional increased in price and it was up 1.7 percent.  2x6 pine printed down 14.4 percent and 2x12-16 pine dropped 2.3 percent.
  • 2x4 dimensional spruce was up 9.8 percent on freight and duty issues followed by 2x6 spruce, which added 6.3 percent.
  • Truss pricing rose 2.3 percent on higher costs for 2x4 pine and increased fuel charges to have the lumber delivered to the plants.
  • Regular drywall added $30 per thousand while specialty drywall boards increased $50-$100 per thousand.  The net effect on board was 10.1 percent to 14.6 percent up
  • Tile backer added 7.5 percent on increased costs.
  • Vinyl soffit was up 11.0 percent as manufacturers raised yearly pricing.

Freight issues will be a huge influence on pricing this year as drivers’ wages, driving regulations, and fuel prices are poised to increase costs and limit further availability.  Expect lead time to extend somewhat as manufacturers may struggle to find drivers for loads.

2018 has the makings for a strong year in housing if the chaos in Washington D.C. settles down and an unexpected crisis is not created.  The fundamental looks okay except for the affordability issue, which grows worse daily.  Ultimately, the lack of affordable housing could be the extinguisher of any long-term growth in the housing market.  

Builders should beware pricing projects for March and April with January’s pricing as warm weather and new tax cuts could make the markets volatile.  Now is the time to install price adjustment clauses in your contract.  If you would like one based on this Index please email Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. for a copy.

Until next month, stay warm and get ready for a busy 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. .

 

 

 

December 2017 Whole House Commodity Index

DEC-2017 Graph-reduced

WHOLE HOUSE COMMODITY INDEX - December 2017

by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index for December continued the decline in mid-December, as wood commodities continued to fall.  The Whole House Commodity Index dropped .3 percent to $32,644, which is 4.1 percent more than January 15th.  A 4.1 percent inflation rate in structural building supplies to construct a home for 2017 is significant and no one should expect this number to retreat in 2018.

The markets are finally shaking the haze from the hurricane season.  The commodity markets were overly enthusiastic in their pricing during the hurricane season and the last ruling in the Canadian-United States Softwood Agreement actually lowered duties, which weighed on the markets.  Plus, there seems to be a pause by markets as they search for direction from Washington D.C. on the impact to housing and interest rates from the new tax policies.

Here are the notable price movers in the Index for the last 30 days:

  • 2x4 yellow pine was up 9.4 percent as demand for truss material and treaters spur a continued backlog created by the hurricane season.  2x6 pine added 2.0 percent while 2x12 pine was flat.
  • The spruce lumber markets retreated as clarity on duties and the demand equation changed with the winter season.  Spruce studs dropped 3.9 percent while 2x4 spruce dropped 5.4 percent, mirrored closely by 2x6 spruce at a drop of 4.4 percent.
  • OSB sheathing continued full retreat posting a 20.7 percent drop while CDX pine remained flat.  Oversupply and winter could produce more downward pressure.
  • Truss prices increased .4 percent on higher 2x4 cost.
  • It appears the markets are in a wait and see mode as the housing demand is sorted out.

The drivers for the markets in 2018 will be the housing and tax policies in Washington D.C, the affordability factor and the immigration of residents from Puerto Rico and Venezuela to Florida.  There could be significant pressure on Florida from new immigrants, which could create major demand in housing, especially multi-family.  The positive part of this immigration could be a minor ease in labor availability. 

These are not normal times and this is not your father’s housing market.  In normal situations, the housing demand would create a boom, but affordability and housing policies could and probably will stifle demand.  If second homebuyers, which are a primary driver of the Florida market, are spooked by hurricanes and new tax policies toward housing, it could dampen sales.  Other challenges, such as higher property taxes along with flood and property insurance concerns, may bring people away from the coast toward Lake and Sumter counties. 

Expect pricing on most building materials to go higher as trucking and labor costs continue to escalate with little abatement in sight.  Builders should be very mindful of a volatile market in 2018 and should include a price escalation clause in their contract. Don’t forget, we have developed legal verbiage for builder contracts that is tied directly to this Index.

Let’s all hope for a calmer 2018 so that focus can be put towards how to solve the affordable housing issue.  On behalf of Ro-Mac Lumber & Supply, we hope you have a Merry Christmas and a very prosperous New 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. .

November 2017 Whole House Commodity Index

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WHOLE HOUSE COMMODITY INDEX - November 2017

by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index for November dropped 1.3 percent to $32,729.15 as sheathing products went into full retreat.  As the weather turns cooler and the hurricanes of fall grow dimmer in memory, it is obvious the market is overpriced in sheathings.  Continued declines in sheathing are expected and as the snow begins to fall and consumers begin thinking about Santa Claus expect other products to follow.

Here are the notable price movers in the Index for the last 30 days:

  • Wire mesh dropped 3.7 percent and foundation rebar 13.5 percent on heavier availability.
  • CDX dropped 1.8 percent while OSB sheathing collapsed 26.0 percent on overpricing during hurricane season.
  • Pine dimensional lumber was down in all sizes.  2x4 was off 1.6 percent, 2x6 down 2.9 percent, and 2x12 pine down 6.8 percent.
  • Dimensional spruce increased on the continued problems between the United States and Canada in regards to the Softwood Lumber Agreement.  2x4 spruce jumped 8.3 percent while 2x6 spruced added 7.3 percent.  Oddly, spruce studs printed down 1.4 percent as buyers tried to sort this complicated issue out.

Manufacturers and suppliers are beginning to announce price increases for the first quarter.  Thus far, price increases have been announced in drywall, doors, and windows.  Based on current projections, some of these price increases will probably stick while more aggressive increases will be subjected to heavy market pushback.

Winter weather and the politics in Washington, D.C. will probably drive the markets the most over the next few months.  Both are impossible to predict and it could be like spinning a roulette wheel—boom or bust. There should be minimal upside risk in pricing through December based on the high prices of the last few months.

I hope you have a blessed and happy Thanksgiving.  Please remember those who are less fortunate.

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. .

October 2017 Whole House Commodity Index

graph wh-17-10-OCT

 

WHOLE HOUSE COMMODITY INDEX - October 2017

by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index for October increased 1.9 percent to $33,157.65 primarily on the strength of the wood commodity markets bolstered by four United States landfalling hurricanes in the last two months.  As of mid-October, the commodity markets are beginning to settle as most traders realize that hurricane season is quickly coming to an end, the re-building will be much slower, and the larger housing numbers are what will really drive the market—not the hurricanes.

Events like hurricanes create volatility and market spikes.  However, it takes large fundamental movements in the markets to create trends.  The large fundamental numbers in the housing market and economy, which dwarf the spike of three hurricanes, are not pointing to a market that can support the current commodity pricing levels.  In fact, I think an argument can be made that these spikes in pricing will probably contribute to an overall slowing in the market because it exacerbates the affordability issue.

Consider these housing and economic numbers:

  • National new homes sales in August were down 3.4 percent from the previous month and 1.2 percent below last year.
  • National housing starts were down 0.8 percent in August and only 1.4 percent above 2016.  Their pricing coupled with the hurricanes probably did not help these numbers in September.
  • The United States Department of Labor reported a loss of 33,000 jobs in September, which is the first month wherein jobs have been down in seven years.  That is very concerning.

Plus what is missed by many is that skilled labor constraints, more regulations, and the loss of time due to storm cleanup is creating slower home construction times, which will naturally slow down demand for products.  With the holidays quickly approaching, there is little doubt that pricing in many of these commodities will retreat quickly as the reality of the market replaces the anxiety from the hurricanes.

Here are the notable price movers in the Index for October:

  • Rebar was up 3.3 percent on continued trade and tariff concerns.
  • OSB sheathing was up 18.1 percent and CDX plywood added 0.9 percent.  CDX has been in short supply since the storm, which is the reason why more pressure is on OSB.  Trucking issues are settling and CDX is starting to flow again.
  • Spruce studs were down 0.7 percent while 2x6 spruce added 7.9 percent and 2x4 spruce jumped 7.2 percent.  Shorter length dimensional spruce has started to decline.
  • 2x6 pine dimensional lumber was up 17.9 percent and 2x12 pine added 9.6 percent, but trucking concerns and the will by dealers to balance inventories should create a fallback position for pricing.
  • Trusses added 4.7 percent on higher lumber pricing.
  • 4x4 treated posts were up 10.4 percent while treated 2x4-16 increased 7.9 percent.
  • Casing moulding retreated four cents while PVC trim dropped a little less than 2.0 percent.
  • Roofing added 2.4 percent on extra trucking charges to get product shipped into Florida.

A big factor in the markets, which is helping to push up pricing, has been trucking.  With so many natural disasters, trucks are difficult to find because many are hauling basic necessities, survival supplies, or trash.  Hurricane Nate, which hit the Mississippi Gulf Coast a couple of weeks ago, probably slowed the market abatement—but it is coming.  With little damage reported, many suppliers will focus on selling inventories on the ground. 

My forecast/advice to builders is that pricing will moderate further as we get into November.  However, spot shortages on specialty items will remain.  Special order items like windows and doors are a problem, and builders should expect longer lead times.  Builders should be more worried about the trade policies affecting pricing in the next quarter than past hurricanes.  If the large fundamental numbers do not start showing more life, then expect pricing to really moderate by the first quarter of 2018.  Watch the trends in housing and ignore the emotions from these hurricanes. 

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. .

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