Whole House Commodity Index 03/16/15

graph WH 16mar15

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) remained basically frozen last month with a mere tenth-of-one-percent decline to $30,349.  The Index has remained in this very narrow range since October 2014, with advancers being offset by decliners each month.  It has been almost a year since the Index made any real increase or decrease.  While that sounds great, the problem is that these numbers indicate a lackluster housing market.

Consider that the National Association of Home Builders - Builder Confidence Report dropped two points this month.  In addition, Black Knight Financial Services is reporting an 11 percent repeat foreclosures in January.  Housing starts dipped two percent in January and the lumber commodity markets are in a decline.  In fact, many analysts consider the lumber commodity markets as the biggest indicator of the future direction of the housing market. 

The weather has been blamed for a lot of the dismal news in regards to housing.  While the winter season has been tougher in some areas, doesn’t it usually get cold and snowy up north during wintertime?  Plus, the weather has been great in the three biggest states in the union—California, Texas, and Florida.  These three states are the biggest drivers in the country. 

The real concern should be focused on the oil patch areas and the harsh economic headwinds that come from collapsing oil prices.  If prices remain low and production is dramatically reduced, this will have a major negative effect on the nation’s housing market. 

Here are the few movers from this month’s Index:

  • Rebar added 2.2% while wire mesh retreated 5.5%.
  • Felt dropped 2.0% on winter buys.
  • Pine CDX plywood added 1.0% while OSB sheathing dropped 12.8%.
  • Dimensional spruce gave back 6.4%-8.5%, depending on size and length.  Those markets are searching for buyers.
  • Narrow pine gave back as much as 5.3% while wide-width pine eked out a 1.9% increase.
  • 4x4 treated posts added 6.5% on spring buys.
  • Engineered beams added 3.1% on higher costs.
  • Door pricing was up on average 5% on annual increases by manufacturers.
  • Garage Doors added 3.1% on new yearly pricing.
  • Cement siding added 5.4% on a push for higher pricing.
  • Annual increases by doors essentially wiped out the declines in commodities.  Most of the increases in other building lines have taken place for the year.  Next month, without an increase in housing activity, the Index will probably decline.

Let’s face it—we all need housing to meet the expectations most of the experts had for this year.  I don’t buy some of the arguments as to why builders are not building.  I think the main problem remains—ordinary people cannot obtain financing—it’s too tight and requires jumping through too many hoops to secure. 

The next two weeks will probably be the best indicator of the housing market for the next three months.  If prices continue to hold flat or decline, you will know the direction. 

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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