November 2017 Whole House Commodity Index

wh graph 17-11-16 mc

 

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. .

September 2017 Whole House Commodity Index

graph wh-17-09 SEP

Whole House Commodity Index 

September 2017  -  By Don Magruder

Last month, the word was “uncertainty.”  This month, the new word is “supply.”  In the last 30 days, the United States has been clobbered by two major hurricanes—the first since 2005.  The market is in disarray as it tries to figure out the long-term impact of rebuilding versus business lost as well as the overall health and direction of the country’s housing market.  During major weather events, such as Hurricane Harvey and Hurricane Irma, trucking and manufacturing delays can play havoc on supply, which is exacerbating an already dysfunctional supply chain.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index increased a modest 0.1 percent to $32,453, as robust declines in the sheathing markets were offset by declines in drywall and spruce studs. As the repairs from these two hurricanes ramp up, expect pricing and supply on many items to become spottier.  The supply chain is about to be tested, since being decimated by the Great Recession.

Please find below the notable price movers in the Index over the last month:

  • Wire mesh was up 3.8 percent on trade concerns.
  • OSB sheathings increased 15.6 percent while CDX pine added 16.7 percent on pressure from the hurricanes.
  • Narrow width pine dropped less than 2.0 percent while 2x12 pine added 3.3 percent.
  • Spruce stud declined 2.1 while dimensional 2x4 and 2x6 spruce added plus-5 percent.
  • Drywall retreated from 5.0 to 6.8 percent on adjusted market pricing.

Unless housing eases more than expected over the next couple of months, pricing should remain firm with the focus on longer lead times due to production and trucking issues.  Dealers and builders will have to get adjusted to longer lead times for many commodities, especially items like doors, windows, and specialty roofing.  It is imperative that builders push their customers to make product decisions much sooner in the decision-making process.  Lead times and availability in products as well as labor could very well be the biggest problems through the end of the year—not price.

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. .

August 2017 Whole House Commodity Index

17-08 AUG wh Graph-web

Whole House Commodity Index 
August 2017  -  By Don Magruder

Uncertainty—here’s that word again.  There is uncertainty in the geopolitical world, uncertainty that anything can get done in Washington, D.C., and huge uncertainty in regards to the course of the U.S.A.—Canada Softwood Lumber Agreement.  All of this uncertainty is starting to cause buyers, builders, and suppliers to question the long-term outlook of housing.  No doubt, as long as this uncertainty remains you will see additional months where the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) declines like it has over the last 30 days.  The Index dropped 0.2 percent to $32,505, which marks three out of four months in decline.

There was little appetite to increase prices, with most markets being mixed. The following items are the notable price movers for the August Index:

Rebar added 0.5 percent on talks of tariffs.

CDX pine plywood dropped 3.0 percent while OSB sheathing added 6.9 percent.  Typically, CDX leads the sheathing markets and it will be curious to see if OSB follows this month.

Dimensional spruce was mixed as 2x4-16 pricing was down 1.5 percent and 2x4 studs erased 2.3 percent of increases.  However, 2x6-16 spruce added 3.2 percent.

  • Pine pricing is up and down depending on width and length.  2x4 was up 3.2 percent, 2x6 added 8.3 percent, and 2x12 pine printed down 1.1 percent.
  • Truss pricing was down 1.1 percent on lower wholesale pricing.
  • Treated posts were down 2.8 percent.
  • Aluminum ridge vents added almost 5.0 percent.
  • Wood moulding prices were up 4.2 to 6.7 percent on higher import pricing.
  • PVC trim siding was up almost 2.0 percent.

The inconsistent movement of pricing in the market is a microcosm of the uncertainty that exists.

Reports of a deal with the U.S.A.—Canada Softwood Lumber Agreement could mean a big decline in pricing initially. The deal being floated would be more about restricting imports to only 30 percent of the total United States market and less about duties.  Manufacturers in the United States have rejected the measure because it fails to prop up pricing.  One big concern is that U.S. manufacturers could not keep up.  One expert believes the capacity in the United States is about 68 percent, at best, and that would mean imports from other areas like Europe and Russia would fill the gap caused by the lack of Canadian wood.

This agreement would deal with import quantities and not artificially raise lumber pricing through duties, which is the real goal of American producers—to raise prices to increase profits.

Be on the watch for hurricane season.  Any threat will mean a quick bump in the markets and a strike by a major hurricane would get the markets running until November. Builders should keep a little in their back pocket in case of an emergency.  Of course, if the uncertainty gets worse expect the markets across the board to react similarly.

One last cautionary note.  Keep an eye on the Chinese trade review by the Trump Administration.  If large tariffs are implemented, that could mean short inventories and large price increases in all steel related products—including nails, rebar and wire mesh.

Until next month, pray for clear weather and clear heads in Washington, D.C.

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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