The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for June dropped 1.2 percent to $32,301 as lumber and panel products retreated from spring highs. There was no appetite to increase prices in other building supply sectors, which hints that the markets are cooling. Unlike Wall Street, the commodity markets are suggesting a different economic future. It appears caution as well as uncertainty are creeping into the housing market.
Recent housing numbers suggest the commodity markets are telling a story few people want to acknowledge. Consider the following housing numbers from April:
Here is my view of the numbers as they relate to housing demand:
In the May Index, there was a slight drop in cost and I noted my skepticism as to whether the market had the legs to rebound. I am growing more concerned that we are having another repeat of prior years where housing didn’t continue its momentum from spring. Despite the threat of additional lumber and steel tariffs as well as increased labor costs, the calls for increased pricing are not being heard.
I hope this is late spring, early summer doldrums for the housing market. Builders and suppliers should be a little wary. There’s no doubt that we would be in a housing boom if the market could produce lower cost starter homes. However, I am not sure that is achievable. To me, this shapes up to be a surging custom home building market, with those homeowners who have the financial means.
The following items had notable wholesale price changes over the last 30 days:
Just a note—the moulding companies are forecasting some fairly significant price increases in July as increased overseas pricing is coming to fruition. This has more to do with the country’s trade policies than it does demand.
One caveat is that we are entering hurricane season. The forecast is for more threats and a hurricane such as Matthew could throw the markets into turmoil. Builders should monitor both the weather and demand. I expect mills and manufacturers will hold onto pricing if they can, but they must see better housing numbers. Builders should remain cautious in their bidding and realize that numbers may have to be sharper.
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