Whole House Commodity Index 11-18-2013

Copy-of-Graph-for-New-Home-Construction-Price-Analysis-November-2013 

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for November 2013 settled at $29,309.57, which is 0.3% below the prior month.  In the last 30 days, the market dropped and then began to rise.  It appears within the next week or so it will recover all losses.  Since last November, the Index is up 6.3% and the building supply market continues to show higher inflation than many other sectors.  Higher delivery costs and higher wages for skilled workers appear to be the culprit.

 The following are the notable price movers since last month: 

  1. Price increases for domestic steel pushed rebar prices up 4.4%.
  2. CDX pine plywood dropped 5.3% while OSB sheathing closely followed at 5.8%.  Both markets have been trying to firm in the last week.
  3. Narrow 2x4 pine dropped 3.2% while wider width 2x6 and 2x12 pine increased 2.4% and 3.3%, respectively.
  4. Spruce studs eased up 2.2% while 2x4 and 2x6 spruce increased 6.3% to 8.3%.
  5. Truss prices dropped 0.4% on lower 2x4 costs.
  6. Engineered wood dropped 2.7% as suppliers searched for customers.
  7. Interior doors increased 3.4% on higher manufacturing costs.
  8. PVC trim boards dropped 2.9% as competitors fought for market share. 

There is an unsettledness in all of the markets as 2013 ends. 

This month’s report is not as important as the following message:  Be prepared for higher prices after the first of the year.  Drywall, windows, doors, roofing, and insulation companies have all announced significant price increases after the first of the year.  Many companies are struggling with profitability, and extra costs from government and increased labor costs are going to force them to increase their pricing. 

If you are builder who is bidding projects for construction after January 1, 2014, you should build in an inflation factor for materials of 3% to 6%.  It really depends on what the commodity markets do, but I suspect mills will jump into the price increase party.  Throw in that many builders will have to pay more for labor and there could be some real sticker shock.  Good planning now could save you thousands of dollars later. 

Now is probably a good time to put a price escalation clause in  your contract.  If you would like a sample price escalation clause tied to this Index, please contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. . 

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 This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

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