By Don Magruder
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for July 2016 increased 0.2 percent to $31,260.28 and this marks the fifth consecutive monthly increase. The increases this month were primarily from an escalation in sheathing prices as most other wood commodities remained flat to down. The markets at all levels are feeling labor and cost increases, which are pressuring companies to increase prices, but housing has yet to take-off as promised this year. Political and civil unrest seem to be distracting the markets and causing some buyers to sit on the sidelines.
The following are the notable price changes from the Index as compared to last month:
Unless there is a market variable next month, such as a hurricane, the general motion suggests the string of months wherein costs are increasing may be ending. Overall, the amount of this month’s increase was minor and more items incurred downward pressure.
The National Council on Compensation Insurance (NCCI) reissued its new guidelines for the proposed increase in workers’ compensation premiums for the state of Florida. Based on the Supreme Court decision and a new Senate bill, the NCCI recommends a whopping 19.6 percent increase, which will become effective on all Florida companies on October 1, 2016. This is a huge amount and will ripple throughout this industry, which is so highly influenced by already high premiums. Expect much higher prices once the state makes a final decision.
Steel pricing is going up dramatically. From steel construction framing to steel lath for stucco, pricing is going up big time. Multiple increases of 10 and 15 percent are being proposed. Builders should be mindful of projects that take a lot of steel.
Plus it is getting to be the heart of hurricane season. Supply chains remain tattered from the Great Recession and builders should be aware that a real threat or, even worse, a strike on the United States by a hurricane could create real supply problems. At this point, builders should have a price escalation clause in their contracts protecting them against unforeseen events. Now is a time to be cautious.
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, cntact Rebecca Ballash.