Whole House Commodity Index 02-17-2014

Copy-of-Graph-for-New-Home-Construction-Price-Analysis-February-2014

 

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) remained relatively flat at $29,491.06, as increased freight rates and price increases in non-commodity building products offset modest declines in commodity pricing. The grip of a harsh winter has subdued short-term demand but not long-term enthusiasm. Many in the construction industry believe 2014 will be a strong year; however, total housing permit numbers released in January for the month of December were down 3% and 4.8% in single family. 

There is a belief by many that the harsh winter weather has depressed permits and housing starts in January. This could be true, but if this weak trend continues at what point do you stop blaming the weather?

Here are the Index’s notable movers for February:

1. Rebar was down 4% from over supply due to imports.
2. CDX pine plywood gave up 8.8% while OSB dropped 3.3% due to bad weather.
3. Pine lumber had wide with pine dropping 3.0% with narrow width 2x6 going up 12.2%.
4. Trusses jumped 1.6% on higher freight, material, and labor costs.
5. Moulding jumped 6.7% on increased pricing.
6. Door prices were up almost 3% on pre-announced increases.

Increased pricing concerns appear to be growing over the next few months. The labor dispute settled between the Canadian National Railway Company and the Teamsters has many wholesalers predicting a 3-5% increase in freight rates later this spring. Rumors of huge, foreign block buys of spruce are floating as if to sway buyers off the fence. Plus, letters and notices have been sent out for some very hefty increases in concrete.

It appears the will of the market and its players is moving higher, but the reality of housing starts could get in the way. The one thing that will really determine if this market goes on a pricing tear is demand. Simply put, if the weather improves in the next couple of weeks and demand heats up expect pricing to quickly move upward.

Builders should be very cautious in bidding projects at today’s prices for start time in March or April. There is a good chance the cost of business is going up. Be sure to put a price protection clause in your contracts.

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. To sign-up for the Index and other free market reports go to www.romaclumber.com. 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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