The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for December 2012 remained flat at $27,550.10, which is just a mere $9.83 above the huge increase of November. This big number for December runs counter to the conventional trends of the month. It appears the final Index of the year could be a launching point of a very inflationary period in 2013.
First and foremost, this December’s Index value is the highest in the history of this report. In December 2005, four months after Katrina, this Index was $27,390.90; today, it is about 1% more. Since last December, the Index has increased 9.7%--the analogy is simple--the cost to build a house rose almost 10% in 2012. That is a huge number and very inflationary.
The bad news is the inflation in building materials is not ending. According to Bloomberg Financial, lumber futures are at a six year high, which indicates lumber related products will cost more in 2013; however, there is a growing list of other manufacturers in building materials that have already announced price increases for the start of 2013.
The current list of price increases consists of the following product lines:
Drywall 30% Insulation 10% Metal Studs 10%
Roofing 10%-13% Insulation Board 5% Moulding 7%-10%
As most can figure out fairly quickly, this list covers most of the materials used in the entire house.
As far as the price changes in this month’s Index, movement was limited, as most manufacturers were pleased to hold onto November’s price increases.
In summary, the Index moved very little, but the big news is that it did not drop as it typically does during the month of December.
My strong suggestion for all builders is to watch long-term quotes going into next year, and be aware--as it looks now, the price of housing could go up another 10% in 2013.
Have a Merry Christmas and a Happy New Year. Thank you for reading our report and please feel free to share it with others.
The Ro-Mac Lumber 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