Last month, the housing market was looking for traction. Based on recent pricing, it didn’t find it. The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for November increased 0.1% with declining prices pacing a 4-to-1 advantage over advancing prices. The early wintry weather in the northern areas is not what the housing market needed, and there is a growing expectation that the year could end very spotty. This does not bode well for commodity prices, which includes declining fuel prices.
For the last six months, the Index stayed within a less-than-one-percent range. While the stability in pricing is welcomed by many builders, it probably underlines a malaise in housing demand. Most believe if demand had firmed, as originally forecast for 2014, then commodity pricing would be much stronger due to supply chain and manufacturing issues.
Recent 2015 housing forecasts by the National Home Builders Association and Moody’s predict huge gains next year; however, many in the industry are jaded because these same forecasts over the last five years have not materialized. Consider the forecast for 2014 predicted 23 percent growth in housing, and some believe the actual number will come in well below 8 percent. Another bad winter and slow start to 2015 will only fuel this skepticism.
As the weather has gotten colder over the last few weeks pricing has dropped. Expect that trend to continue. Most dealers and distributors are buying “hand to mouth” because most believe the market has little momentum to go up. There is some peril given the current state of trucking and longer lead times.
For the most part, builders should expect a flat-to-down trend in pricing to the end of year when annual price increases for such items as insulation board, drywall, doors and other building products will take hold. Whether these annual price increases can take hold will depend more on weather and demand than actual increased costs.
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