Click image to view larger.
Surprisingly, the Ro-Mac Lumber Whole House Commodity Index (Index) for January 2014 increased 1.1% to $29,495.71, despite real winter conditions having most of the control. This indicates that mills and manufacturers are in firm control of the supply portion of the equation. It also does not bode well for moderate spring pricing with pricing arching up in spite of stagnant demand driven by record cold.
To put this in perspective, the following are some interesting comparisons:
These numbers do not indicate that prices will decrease in 2014. If anything, if housing starts top one million for the year, pricing could increase double digits due to struggling supplies.
While the high price scenario is easy to predict there are still real systemic problems with housing, from the new mortgage rules to the problems with flood insurance. Not to mention the lack of capital availability for small companies. The next couple of months should go a long way in predicting the year.
Here are some of the notable price movers for January:
There was a lot of movement in many areas, which netted out an increase.
If the forecast starts come to fruition and the country experiences nasty spring storms, builders should be wary of price increases. Jobs being bid for later in the spring and summer should include a price escalation clause, as pricing could elevate very quickly. Smart and cautious bidding now could save a builder thousands of dollars in losses later.
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