Whole House Commodity Index 02/16/15

TheGraphWEB

 

If builders, manufacturers, and mills hoped February would offer some positive direction for the markets then all will be disappointed because the markets have been frozen—literally.  The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for February 15, 2015 was flat, registering a meager $4 drop (or less than 1/10 of one percent).  It appears our old friend uncertainty has entered back into the market, bringing his buddies Old Man Winter and a chaotic world economy.  The way many of the commodity markets look at this time, Mr. Deflation may be just around the corner.

Most in the industry hope the markets are frozen by bad weather, but regional executives are telling me that business is flat-to-down across the country, including areas with good weather.  If the markets do not begin showing some heat by mid-March, the optimistic housing forecast may have to be doused with the cold reality of an underperforming market.

Little changed last month in the market, with some items moving in different directions.  Below are some of the notable changes in this month’s Index.

  1. Rebar dropped 7.2% while wire mesh added 1.9%.  Poly sheathing gave back 2.8%.
  2. Spruce lumber dropped 3.8%-7.5% while pine dropped 2.0%-6.2% with narrow width falling farther.
  3. CDX pine edged up a couple of tenths while OSB added 5.7%.
  4. Trusses declined 1.8% on lower lumber pricing.
  5. Insulation was up 13.6% on new yearly pricing.
  6. Many metal connectors were up on increased pricing for the year.

Concern about the port issues out west is growing, and there is a fear it will spread to the east coast ports, especially those in Florida.  If the issue is not resolved in the next few weeks, certain imported items could have limited shortages and longer lead times.  Consider the items you buy, which have Asian roots, and plan accordingly.

The next 30 days will probably be the best predictor to the upcoming year.  If the market remains sluggish with flat-to-down commodity prices, expect sales to sputter.  If prices and activity crank up with warmer weather, expect a much better performance than last year. 

Now is not the time to do long-term quotes, because prices could be way up in the next 30 days.  Protect yourself with a price escalation clause.  If you don’t have one, you can utilize one we developed in conjunction with this Index.  Contact Rebecca Ballash at  This email address is being protected from spambots. You need JavaScript enabled to view it.  for a copy of the clause. 

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

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