January 2019 Whole House Commodity Index

 19-01 wh-graph-less1mb

WHOLE HOUSE COMMODITY INDEX - January 2019

by Don Magruder, CEO of RoMac Building Supply

The RoMac Building Supply Whole House Commodity Index (Index) is staggering into 2019 like a drunkard who’s just been on a 12-month binge. Let’s be honest, for high pricing in the housing market, the last year has been one big party for mills, manufacturers, and the labor market. However, 2019 could be a different story. Although the party may not be over, the parents may have come home. The first Index for 2019 is down 1.2 percent to $32,911, as the wood commodity market continues to give back previous gains. A bottom may be appearing in the wood markets as dimensional spruce increased in price plus 2 percent over the last month.

Overall, all sectors in the supply and construction industry have concern about the overall durability of the economy and housing market. Housing reports over the last couple of months have been unimpressive; pricing has collapsed; and the chaos in Washington, D.C. seems to be getting worse. No one believes the government shutdown is good for business.
The big difference, which suggests this year will be far different than 2018, is the tone in price increases. A year ago, price increase announcements in building materials at all levels were popping quicker than firecrackers at a Chinese New Year celebration.

As 2019 begins, rumors of price declines in many building material items as well as delays in increases are prevalent. Manufacturers and mills are spooked, and it will take a huge increase in housing demand to change the tone.

Listed below are the main price movers in the Index over the last 30 days:

  • 5/8” rebar was down 3.1 percent.
  • CDX pine plywood added 1.1 percent while OSB sheathing was flat.
  • Pine was mixed on size and length. 2x4 pine was down 8.4 percent; 2x6 pine retreated 9.9 percent; and 2x12 pine added 4.2 percent. Expect volatility in pine over the next few months as treaters hit the market.
  • Spruce dimensional was up with 2x4 adding 1.6 percent and 2x6 increasing 2.9 percent. Oddly, spruce studs printed down 5.3 percent.
  • 4x4-8 treated posts increased 6.4 percent as treaters stepped into the market.
  • Interior door units were up 2.7 percent on increased costs from door manufacturers.

Keep an eye on roofing, drywall, and metal foundation materials for the next month or so, because these product lines could be the best to foretell the future of the markets.

I believe spring will usher in higher pricing like it does historically; however, I do not see the levels like those from 2018. If housing demand does not improve and the chaos in Washington, D.C. subside, expect the economy to sputter, which could lead to more downward pressure on pricing. Builders should not bid spring projects with the current low numbers, and everyone should understand that short-term pricing could spike. My best advice is to keep your suppliers close and don’t try to be the lowest bidder on every project.

The RoMac Building Supply 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 RoMac Building Supply in Central Florida. Go to romacfl.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 2018 Whole House Commodity Index

 18-12-17 wh graph

 

WHOLE HOUSE COMMODITY INDEX - December 2018

by Don Magruder, CEO of RoMac Building Supply

The RoMac Building Supply Whole House Commodity Index (Index) for December declined 0.6 percent to $33,300.00, which continues the downward pressure that started a couple of months ago. Lowering prices in wood commodities primarily drove the decrease as mills and manufacturers searched for buyers through the rain and cool temperatures.

It seems like excuses using the weather report are being used more often than blaming the real culprit—falling housing demand. The latest report by the United States Census Bureau for October, when compared to the previous year, shows new home sales declined 12.0 percent and housing starts dropped 2.9 percent. The continued erosion of the housing demand equation is the big issue for the last quarter of 2018.

2018 has been a brutal spin cycle for most builders, subcontractors, project owners, and dealers if you consider this one fact—the Index only increased 0.5 percent from January to December 2018. During the year, huge increases in wood commodities coupled with significant inflation in most other building material lines hit a crescendo in June. At that time, tariff threats, labor shortages, fuel costs, and shortages in truck drivers converged in the markets and created a panic in pricing and supply.

Since June, the Index dropped 8.6 percent with wood commodities plunging while other material costs continued to increase. This pricing mask will be unveiled if there is a significant increase in wood commodity pricing in the spring. To make this point, consider that 7/16” OSB dropped 58.5 percent; 5x8” CDX is down 31.4 percent; and spruce studs are down 27.8 percent. This is why builders should be wary about quoting today’s pricing for jobs later in the spring—there is underlying inflation built in the house that will be exposed if the wood markets go up.

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

  • Foundation poly dropped 8.0 percent on lower costs.
  • Although 5/8” CDX increased 1.1 percent, 7/16” OSB dropped 15.2% on over-production.
  • 2x4 #2 yellow pine dropped 7.9 percent while 2x6 and 2x12 added 6.7 percent.
  • Trusses gave back 1.1 percent on lower 2x4 pine pricing.
  • 2x4 studs were up 0.4 percent while 2x4 dimensional dropped 6.4 percent. 2x6 spruce added 4.4 percent. Spruce is a mixed bag driven by in-time shipping demand.
  • Architectural shingles gave back 1.3 percent as roofing manufacturers started searching for buyers as Hurricane Irma business started to wrap up.
  • Engineered beams were down 6.1 percent on lower pricing.
  • 4x4 treated posts gave back 6.1 percent.

Window and door manufacturers have announced price increases after the first of the year, and others are trying to line up for more. If home sales and housing start numbers continue to sag, I expect capitulation in other areas of construction materials. Prospects of manufacturing curtailments and shutdowns are growing every day.

No one said being in the construction industry was easy, and for 2019 indications are there could be other challenges. Gathering and understanding the most information to make informed decisions is your best defense, and I hope this report helps.

I hope and pray everyone has a Merry Christmas and Prosperous New Year!

The RoMac Building Supply 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 RoMac Building Supply in Central Florida. Go to romacfl.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 2018 Whole House Commodity Index

 18-11-15 graph wh

WHOLE HOUSE COMMODITY INDEX - November 2018

by Don Magruder, CEO of RoMac Building Supply

 

The RoMac Building Supply Whole House Commodity Index (Index) declined 2.4 percent to $33,487.87, which wiped out most of the gains for 2018. The Index is only 1.7 percent more than January 2018. Unfortunately, the wood commodity markets are mirroring the beatdown of the stock market for the year. Despite two major hurricanes hitting the United States in the fall, the overall demand equation diminished any effects from these landfalling hurricanes. This is highly unusual.

The question for builders, mills, and producers heading into winter is, “What will spur housing demand in a rising interest rate environment with snow flying up north?” It appears not much. Yesterday, West Fraser Timber Company announced a 300 million board foot permanent curtailment in production at two of their sawmills. This may be the start of mills trying to curtail supply to stabilize and boost pricing.

The hardest hit portion of the Index is the wood commodities. Producers of other building materials such as roofing, drywall, doors, and windows have yet to hop on the price-reduction train claiming higher fuel and labor costs. I am not sure if this stance can be maintained if the housing market is indeed, softening. There may be some price capitulation in these areas as winter grows colder and the need for January orders increases.

Little doubt, most suppliers are working their inventories down and hampering demand because of the price declines. Many committed to European spruce earlier in the year, which is now arriving. That could keep pricing soft. Builders should expect price gyrations in a modest range as lengths and needs become more specific to accommodate just-in-time purchasing.

Here are the notable price movers in the Index since last month:

  • Wire mesh gave back 2 percent as suppliers searched for buyers.
  • 5/8” CDX gave back 15.1 percent while OSB added 2.2 percent. It appears CDX is lagging 30 days behind the OSB markets.
  • Spruce studs dropped 8.6 percent while dimensional 2x4 was off 7.6 percent and 2x6 spruce barely dropped 0.7 percent. This is indicative of suppliers only filling needs with these types of sporadic moves.
  • 2x4 pine added 8.6 percent while 2x4 pine printed down 7.6 percent. Wide width 2x12 pine gave back 2.2 percent.
  • 4x4-8 treated posts went down 1.6 percent while 2x4 treated dropped 11.0 percent.

Pricing tried to rebound in the last few days. These curtailments may stabilize pricing in the short-term; however, a cold, wet winter could be a hard obstacle for these markets to overcome.

Builders should be slow to give back pricing to clients that were quoted earlier in the year, because many lost money on projects during the huge price runups. Plus, who is to say what will happen in the spring given the uncertainty in Washington, D.C. and the continued threat of additional tariffs? In short, don’t reset prices based on this month’s news, because they could change next month.

Despite the turbulent year in the markets, next week is Thanksgiving and we are all still very blessed—challenges help us see these blessings a little more. Have a wonderful Thanksgiving with plenty of good food, joy, and happiness!

The RoMac Building Supply 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 RoMac Building Supply in Central Florida. Go to http://RoMacFL.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 2018 Whole House Commodity Index

wh graph 18-10-15

WHOLE HOUSE COMMODITY INDEX - October 2018

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

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) declined 1.7 percent to $34,317.34, which wiped off most of the previous month’s gains fueled by Hurricane Florence, which struck the Carolinas. The most perplexing aspect of this month’s Index is the lack of impact to pricing that Hurricane Michael had on the commodity markets. Typically, a major Category 4 hurricane striking anywhere in Florida pushes sheathing prices upward. However, Hurricane Michael did not. In fact, prices dropped. Although Hurricane Michael entered one of the least populated parts of the state of Florida, its lack of impact is probably more about overall market demand than the devastation of the hurricane.

Evidence is mounting that the construction demand equation is eroding, and it could occur faster than many first believed. According to Dodge Data and Analytics, construction activity dropped by nine percent in August matching a nine percent drop in July—these are huge declines. There was a 19 percent decline in non-residential construction and a seven percent decline in residential construction. The huge decline in commercial building activity is very concerning.

While a hurricane can create panic buying, the result is that the activity lost because of the hurricane’s disruption can outweigh any business gained from damage. Declining commodity markets the same week a major hurricane hits the United States is not a good sign for market activity.

The following are the major price movers in the Index since last month:

  • Rebar was down 1.8 percent on supply and demand issues.
  • CDX pine dropped 9.4 percent and OSB sheathing gave back 27.3 percent. These drops are due to oversupply and weakening demand.
  • 2x4 pine was up 2.3 percent. 2x4 yellow pine is the only wood commodity item that increased in price. The treaters and truss plants are driving this demand.
  • 2x6 pine dropped 12.6 percent while wide-width 2x12 pine declined 9.8 percent.
  • 2x4 and 2x6 spruce were down 15.0 percent while 2x4- 92 5/8” studs retreated 9.7 percent.
  • Truss pricing was up 2.5 percent on increased pine and labor costs.
  • 4x4-8 treated posts gave back 6.1 percent.
  • Roofing shingles declined 2.6 percent on weaker demand.
  • Exterior doors were up almost 4.5 percent on increased costs driven by tariff concerns with pledges for more increases in the fourth quarter.
  • Vinyl soffit was up 8.2 percent on increased costs to manufacture.

While builders should be happy to see the commodity and building material pricing markets decline, they should be concerned with the overall health of the construction market. Here is my reality check on actual demand—in 39 years in this industry, I have never seen CDX plywood and OSB sheathing prices decline the same week a Category 4 hurricane threatened and struck anywhere in the United States. This could be an indication that housing and commercial construction demand is eroding faster and worse than most realize—I hope not.

Commercial and residential builders should be slow to accept conventional wisdom and believe false excuses for losing jobs or customers cancelling projects. If you start seeing a lot of this, and especially if labor becomes a little more plentiful, builders should start preparing for a turndown. It is too early to say, and this could be an aberration, but builders should be wary. Let’s hope that both pricing and markets start showing more signs of activity.

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. .

Ro-Mac Newsletter Signup