by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index for December continued the decline in mid-December, as wood commodities continued to fall. The Whole House Commodity Index dropped .3 percent to $32,644, which is 4.1 percent more than January 15th. A 4.1 percent inflation rate in structural building supplies to construct a home for 2017 is significant and no one should expect this number to retreat in 2018.
The markets are finally shaking the haze from the hurricane season. The commodity markets were overly enthusiastic in their pricing during the hurricane season and the last ruling in the Canadian-United States Softwood Agreement actually lowered duties, which weighed on the markets. Plus, there seems to be a pause by markets as they search for direction from Washington D.C. on the impact to housing and interest rates from the new tax policies.
Here are the notable price movers in the Index for the last 30 days:
The drivers for the markets in 2018 will be the housing and tax policies in Washington D.C, the affordability factor and the immigration of residents from Puerto Rico and Venezuela to Florida. There could be significant pressure on Florida from new immigrants, which could create major demand in housing, especially multi-family. The positive part of this immigration could be a minor ease in labor availability.
These are not normal times and this is not your father’s housing market. In normal situations, the housing demand would create a boom, but affordability and housing policies could and probably will stifle demand. If second homebuyers, which are a primary driver of the Florida market, are spooked by hurricanes and new tax policies toward housing, it could dampen sales. Other challenges, such as higher property taxes along with flood and property insurance concerns, may bring people away from the coast toward Lake and Sumter counties.
Expect pricing on most building materials to go higher as trucking and labor costs continue to escalate with little abatement in sight. Builders should be very mindful of a volatile market in 2018 and should include a price escalation clause in their contract. Don’t forget, we have developed legal verbiage for builder contracts that is tied directly to this Index.
Let’s all hope for a calmer 2018 so that focus can be put towards how to solve the affordable housing issue. On behalf of Ro-Mac Lumber & Supply, we hope you have a Merry Christmas and a very prosperous New Year.
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