The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index for July increased 0.2% to $29,132.99, due primarily to the strength of popular lengths of dimension spruce and pine. In April, the Index hit its all-time, eight-year record high of $30,023.64. Since that point, it decreased 2.7%, but interestingly, the Index has priced out within a 2/10 range since May. This is not to say that lumber commodity pricing hasn’t dropped since May, but it is an indication that other material scopes have increased in price. A strengthened wood commodity market will have a greater impact on the Index in the future.
May’s Index cost is 5.5% more since the end of 2012 and it is 8.1% higher than last July. Something to consider is that in 2012 the cost of the Index increased 4.3% and I believe it is poised to follow that direction again. Here is my reasoning.
There were not many notable cost moves for this month’s Index, but here are the highlights.
Most items in the Index remained static, but expect higher pricing in shingles over the next month or so, as those manufacturers have announced August increases. Also, expect higher pricing for door and window scopes, due to higher labor and delivery costs.
The biggest problem on the horizon is a shortage of skilled labor. Good subcontractors are highly sought, and many of them are now in the situation of being able to selectively choose jobs instead of searching for work. This week alone, I have been told of multiple stories of subcontractors firing builders for low pay or poor working conditions. Also, there is a real battle for these subcontractors to retain their skilled people. Excellent masons, framers, plumbers and electricians are being paid more and recruited heavily.
For the past five years, builders have fully been in the driver’s seat when it comes to demanding lower prices from subcontractors and suppliers. During that period, many folks in the trades believed that some builders took advantage of a very difficult economic situation. It appears that dynamic is quickly changing. Look for many good subcontractors to fire builders because of hard feelings and low prices as the labor shortage continues to grow.
This is how I can best explain the labor shortage issue. For the last six years, there have been no jobs available in the construction industry and the industry has lost six years of hiring and training the next generation. During that period, there have been a bunch of white-haired skilled craftsman retire or die, which has resulted in a huge brain drain, especially since they had no one to teach. And, about half or more of the workers in our industry lost everything and now are working in other areas with no desire or will to come back. Toss in the fact that most technical schools and colleges have abandoned construction trade training because of the lack of jobs and you now have a huge problem that will take years to resolve.
Here are my two big pieces of advice to builders this month:
Don’t forget the country is less than a month a way from the teeth of hurricane season and a bad storm could quickly change the dynamics. This is the time builders need to protect themselves because the markets could turn very ugly in material cost and labor availability.
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