The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) continued a four-month string of price increases in April despite some cracks developing in some lumber dimensions. In mid-April 2013 the Index priced out at $30,023.64, which is a record high and up 2.6% from the prior month.
To put April’s price into context here are four of the most notable facts:
The market continues to have major influential factors, such as hail storms in the south, stronger housing starts, and limited supply as a result of unconfident manufacturers who are unwilling to take a chance in the current political environment.
For the most part, there was not a massive price increase in all areas. Some prices dropped; however, on a few of the big use items the prices soared, which is why the Index increased so much this month. Listed below are some of the details:
Notably, some cracks have developed in this four-month price run; however, at this time it is difficult to ascertain if these cracks will foretell a full-fledged market correction. The historical increases that occur between April and May, plus the storms in the south, and the accelerated reconstruction efforts in the Hurricane Sandy area because of warmer weather will probably keep pricing firm.
There seems to be a consensus that high pricing is beginning to affect demand as prospective buyers are putting projects on hold. Satisfactory appraisals are still very tough to acquire by many new home buyers, so a 10.7% year-to-year increase may be too much--time will tell. My recommendation is that builders should limit the time period for which a bid price is good. Times like these are the reason why you should include a price escalation clause in your contract.
If you would like a copy of the price escalation clause (which is linked to this Index) for your contract please contact Rebecca Ballash at
The Ro-Mac Lumber 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