Whole House Commodity Index 05-15-2014

Copy-of-Graph-for-New-Home-Construction-Price-Analysis-May-2014

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Has the building season finally started or does this month’s Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) represent a blip on the chart?  The Index for May increased to $30,023.56 (or 2%) from April with many wood commodities pushing up in price. This month is a record high for the Index topping the April 2013 number of $30,023.64.

The results of this month’s Index could be deceiving because previous increases this year in other commodities due to increased fuel costs were hidden because of the very soft commodity market.  Currently, the plywood market is about 20% below the price level of last year while dimensional lumber is about 2% below.

It remains to be seen if this increase in the commodity lumber and plywood markets will have the legs for a full-fledged run as housing in many sectors of the country remains unpredictable. Three aspects affecting pricing, which cannot be ignored, are the increasing cost of fuel, lack of trucks, and new Department of Transportation driver medical qualifications going into effect on May 24, 2014.  If the housing market were at historical or predicted levels, the price of this Index would be much higher.    

The following is the list of the most notable price movers over the last 30 days.

1. Foundation wire mesh was down 2.5% with rebar retreating 1%.

2. CDX plywood added 11.1% while OSB sheathing surged 17.8%.

3. Yellow pine was up 12.9% with other pines were at par, except for wider widths, which added 2.3%.

4. Spruce studs were up 6.8% while 2x4 spruce increased 1.4%; 2x6 barely moved up.

5. Announced spring price increases in shingles pushed pricing up 6.6%; however, I don’t know if there is enough glue in the market to make it stick.  Some special "show” buys are already emerging.

6. Engineered beams got back 3.8%.

Fuel, trucking, and housing demand will determine if this market holds onto these gains.  At this point, there appears to be just minimal momentum.

One soap box I have been preaching on in regards to housing is the availability of credit for potential homebuyers.  New mortgage regulations have pushed most middle-to-lower income people out of the market. This is the reason why 45% of the total homes are sold on a cash basis and most homes purchased are mid-sized, not starter homes. 

The Obama administration announced that it has started reviewing the regulations on mortgage lending and the role of Fannie and Freddie.  It appears there has been an epiphany that there is no private solution to Fannie and Freddie, and that the country’s economic woes can be tied to a dysfunctional and over-regulated government housing bureaucracy.  It will be months before new rules are written, but maybe if some certainty and clarity can be achieved, housing could end its six-year slump.  Expect little action in the short-term, which could bolster these markets; however, at least someone has finally started to recognize the obvious.    

Builders, “uncertainty” is still the word.  The market will probably drift up-and-down until there is confidence this market is truly on the mend or some major natural disaster occurs.  Be careful in bidding because a price that is bid during a market low could pinch a few months later on the upside.

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 This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Whole House Commodity Index 04-16-2014

Copy-of-Graph-for-New-Home-Construction-Price-Analysis-May-2014

 

If something doesn’t happen soon, the spring housing rally won’t begin until summer.  Professionals throughout the construction industry are growing concerned, as better weather provides no more excuses for sagging sales.   The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) decreased 0.9% to $29,738, as downward pressure in all wood commodities offset the modest increases in ancillary building products.

Supply professionals are lamenting the higher fuel costs, labor issues, and shortages of trucks and railcars.  Despite these issues, wood commodity prices have declined in the first two weeks in April.  Is this an aberration or a tell-tale sign of future housing demand?  This uncertainty is leaving many in the marketplace sitting on their hands until actual buyers show up.

The following are the notable price variations in this month’s Index: 

1. Felt increased 2.3% on higher fuel costs.
2. 2x4 narrow yellow pine dropped 4.5% while 2x6 gave up 11%. 2x12 pine was flat-to-down.
3. Sheathing retreated as CDX pine declined 4.8% and OSB gave back 8.2%.
4. Dimensional spruce decreased 6% plus, while spruce studs gave back 7.7%.
5. Truss prices dropped 1% on declines in lumber.
6. Interior doors were up about 0.5%.
7. Garage doors increased 3.1%.

What this market needs is home sales.  If there is a late spring rally in home sales, these market lows will quickly reverse course, and builders who bid projects for later in the summer at these prices could be stuck with a negative profit.  The market is certainly poised for more upside risk than downside risk. The next month will probably be the best barometer for the housing market for the year.  If buyers fail to step into the market, it could end up being a long, hot summer for many builders and suppliers.  Builders should protect themselves with an escalation clause in their contract. If you would like a sample price escalation clause tied to this Index, please contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it.

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 This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Whole House Commodity Index 03-17-2014

Copy-of-Graph-for-New-Home-Construction-Price-Analysis-March-2014

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) increased 1.7% to $29,994.89, primarily on the increase in masonry supplies and sheathings. Prices are up 1.7% since January, and up 2.5% since last year. Interestingly, the March 2014 Index is one-tenth of one percent lower than April 2013, which was the second highest number in the history of the Index. If warmer spring weather boosts sales or there is significant inflation due to fuel costs, expect the Index to hit record highs.

Here are the Index’s notable movers for March:

1. Wire foundation mesh was down 5.3% on imports’ overwhelming supply.
2. 3000# concrete increased 8.6% while block added 6.6% to 9.4% as manufacturers struggled to cover costs.
3. Sheathing costs were up significantly. CDX pine soared 19.5% and OSB sheathing jumped 7.2%. It seems manufacturers have managed supply to current demand.
4. Wide width pine lumber was up 9.0% while narrow widths were mixed in the lower single digits.
5. Spruce dimensional was basically flat trading in the positive single digit range.
6. Vinyl siding soffit added 3.3% while PVC cellular boards gave back 4.1% on increased competition.
7. Moulding prices were mixed as some wholesalers offered deals.

Shingle manufactures have announced increases in April from 3%-5%, which might stick if fuel prices continue to rise and the wicked weather continues. The next 30-45 days will probably dictate the trends for the year.

The weather is improving and this will be the point in which housing will either take off or meander in the doldrums. For the first couple of months of 2014, weather has been blamed for the lackluster numbers; this may be the point in which experts have to quit blaming the weather and start blaming the economy and the new regulatory environment.

If construction steps up over the next month, or so, expect prices to jump dramatically; however, my cracked crystal ball is predicting a very narrow range of price deviations in the short-term. Still, builders should protect themselves with an escalation clause in their contract, because historically bad winters usually result in heavy price runs in the spring.

Watch fuel prices because they are rising. In Central Florida, there have been some spotty gas shortages. This could raise prices in building material items that rely heavily on fuel for production or logistics.

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 This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Whole House Commodity Index 02-17-2014

Copy-of-Graph-for-New-Home-Construction-Price-Analysis-February-2014

 

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) remained relatively flat at $29,491.06, as increased freight rates and price increases in non-commodity building products offset modest declines in commodity pricing. The grip of a harsh winter has subdued short-term demand but not long-term enthusiasm. Many in the construction industry believe 2014 will be a strong year; however, total housing permit numbers released in January for the month of December were down 3% and 4.8% in single family. 

There is a belief by many that the harsh winter weather has depressed permits and housing starts in January. This could be true, but if this weak trend continues at what point do you stop blaming the weather?

Here are the Index’s notable movers for February:

1. Rebar was down 4% from over supply due to imports.
2. CDX pine plywood gave up 8.8% while OSB dropped 3.3% due to bad weather.
3. Pine lumber had wide with pine dropping 3.0% with narrow width 2x6 going up 12.2%.
4. Trusses jumped 1.6% on higher freight, material, and labor costs.
5. Moulding jumped 6.7% on increased pricing.
6. Door prices were up almost 3% on pre-announced increases.

Increased pricing concerns appear to be growing over the next few months. The labor dispute settled between the Canadian National Railway Company and the Teamsters has many wholesalers predicting a 3-5% increase in freight rates later this spring. Rumors of huge, foreign block buys of spruce are floating as if to sway buyers off the fence. Plus, letters and notices have been sent out for some very hefty increases in concrete.

It appears the will of the market and its players is moving higher, but the reality of housing starts could get in the way. The one thing that will really determine if this market goes on a pricing tear is demand. Simply put, if the weather improves in the next couple of weeks and demand heats up expect pricing to quickly move upward.

Builders should be very cautious in bidding projects at today’s prices for start time in March or April. There is a good chance the cost of business is going up. Be sure to put a price protection clause in your contracts.

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. To sign-up for the Index and other free market reports go to www.romaclumber.com. To sign-up for this information via email, contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. .

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