The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index), for the first week of January 2015, increased 0.2 percent to $30,370.42 primarily on the annual increase in drywall and another sizable increase in concrete pricing. Overall, the sentiment remains lethargic as winter weather up north, increasing economic headwinds, and an uncertain housing forecast have made many builders weary of increasing housing inventories. Plus, commodities across the world are being pushed downward, as demand globally appears to be feeble at best.
The interesting part in the first quarter will be if price increases materialize as many manufacturers announced and want, while builders rethink building decisions. There appears there is little impetus at this time for a rising lumber market, but some are holding onto the hope that historically low interest rates just might push some buyers off the sidelines. My concern is if interest rates in the mid four percent range couldn’t get buyers in the market, I’m not sure one point lower will make much of a difference. Money is still cheap. The problem remains that ordinary people cannot get credit or they are unable to navigate through the maze of the home lending process.
Typically, I note at this time the major price movers for the past 30 days. This month I am going to first point out the major price movers for the past year. For many builders, they may want to consider these increases when calculating their new pricing for 2015.
The major price movers since December 2014 (last month):
Concrete related products have been the one building material component that announced price increases that stuck. Drywall and roofing prices eroded as demand declined. Lumber pricing is all over the board and it appears it truly depends on what size and length sitting on the wood deck determines the wholesale price.
One concerning product is CDX pine plywood. Back in the day, plywood was always higher than OSB sheathing but it followed that market; not any more. Because OSB sheathing production is so plentiful and CDX pine plywood manufacturers are dealing with fewer available mills, prices have gone in opposite directions. I do think if the trend continues, the price will force some builders to rethink their CDX plywood use paradigm and switch to OSB.
I hope you find this month’s Whole House Commodity Report insightful in comparison to last year. I personally was surprised by some of the yearly price movers. 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