by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for April 2018 was virtually flat since March. However, there was plenty of movement within the Index indicating that the inflation run in commodities in building supplies is not over. The Index in mid-April settled at $35,134, which is only 0.3 percent more than March. This small increase marks the first time that pricing in the building material sector slowed down this year. Although the flattening in pricing is blamed on a lingering winter in the Northeast and Midwest, the housing demand equation could be softening as pricing becomes unbearable for many prospective homebuyers.
A dive into the actual costs that make up the Index demonstrates the turmoil. Here are the main movers in the Index over the last 30 days:
What is spooky about this Index for the month is that core inflation, which typically does not fluctuate, as wood commodities increased within the Index. Increases in steel foundation rebar, garage doors, insulation, and roofing metal were offset by declines in wood commodities that could be affected by weather. It would not be out of the question to see a rebound in wood commodities over the short-term as spring and summer take hold. This could expose a real pop in pricing.
Builders should be aware that a real base amount of inflation was built into the housing costs over the last 30 days, which will be exposed as wood commodities rebound. This makes future pricing difficult. Unless the market demand declines dramatically expect the Index to remain firm and retain most of the increases it has garnered since the first of the 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