February 2018 Whole House Commodity Index

wh Graph 2018-02 FEBRUARY

WHOLE HOUSE COMMODITY INDEX - February 2018

by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for February 2018 increased a whopping 2.8 percent to $34,030.08 as the January spark in the commodity market raged into a full-fledged flame in February.  This type of increase in the dead of winter is unusual—is this a prediction of what’s to come this spring or will this price run flame out when the weather turns warmer?  Little doubt, it depends on housing starts and that is the question.  The steep decline in housing starts in December coupled with only a 2.4 percent increase in homebuilding starts in 2017 is leading some to pause and see if this price runup can be sustained.

One big element in the recent price increases is trucking.  Prices are going up and availability is being stretched with new record keeping.  This will only grow worse during the spring as agriculture competes for available trucks.

The big price movers in the Index from mid-January to mid-February were:

  • Foundation rebar was up 12.1 percent on the United States trade policies and tariffs.
  • 2x4 yellow pine added 12.1 percent while 2x6 was up 7.9 percent and 2x12 pine added 19.4 percent.
  • The heavy increases in pine pricing forced truss prices up 5.0 percent.
  • Spruce pricing was also up—2x4 studs added 3.6 percent, 2x4 spruce increased 6.1 percent, and 2x6 spruce posted the smallest gain at 1.5 percent.
  • CDX pine plywood increased a strong 7.8 percent while OSB sheathing added a whopping 16.8 percent.  Mills are doing a much better job managing inventories to demand.
  • Exterior doors were up 3.0 percent on higher costs from manufacturers.
  • Engineered wood was up 18.0 percent on increased production cost.

With all the chaos in Washington, D.C., the threat of tariffs, interest rate concerns and changes in the tax law (which hurts secondary housing), the housing market could weaken.  In my view, there is just a likelihood pricing in April could be lower than February.  The next two months of housing numbers will be the best indicator of pricing for the year.

To be safe, builders should beware of pricing projects for March and April with January’s pricing as warm weather and new tax cuts could make the markets volatile.  Now is the time to include a price adjustment clause in your contract.  If you would like one based on this Index, please email Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. for a copy.

Good luck and Happy Valentines Day!

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. .

January 2018 Whole House Commodity Index

Capture JAN-18 CHART

WHOLE HOUSE COMMODITY INDEX - January 2018

by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for January 2018 reversed two months of decreased pricing by adding 1.4 percent to $33,109.  This sets a tone that the new year could be fraught with price increases throughout the supply chain. Many in the industry are optimistic that the housing recovery in the United States, fueled by lower tax rates, will continue and should begin in earnest once the winter weather eases.  

Overall commodity and building material pricing for the fourth quarter was propped up by hurricane repairs from major storms in both Florida and Texas, as well as the Canadian-United States Softwood Agreement trade dispute.  Both appear to have a much lesser influence going into 2018, as hurricane repairs are waning and the United States finalized its duties on Canadian lumber earlier in the month.  

The primary price movers for the mid-January Index update were the following:

  • Wire mesh increased 6.4 percent and rebar added 19.4 percent as low cost imported steel evaporated out of the market place.  Continued tariffs and trade disputes in steel could accelerate pricing in 2018.
  • CDX pine plywood dropped 1.8 percent while OSB sheathing added 3.5 percent.  The winter weather and the market balancing itself are probably the best reasons for the cross in pricing.
  • Only 2x4 yellow pine dimensional increased in price and it was up 1.7 percent.  2x6 pine printed down 14.4 percent and 2x12-16 pine dropped 2.3 percent.
  • 2x4 dimensional spruce was up 9.8 percent on freight and duty issues followed by 2x6 spruce, which added 6.3 percent.
  • Truss pricing rose 2.3 percent on higher costs for 2x4 pine and increased fuel charges to have the lumber delivered to the plants.
  • Regular drywall added $30 per thousand while specialty drywall boards increased $50-$100 per thousand.  The net effect on board was 10.1 percent to 14.6 percent up
  • Tile backer added 7.5 percent on increased costs.
  • Vinyl soffit was up 11.0 percent as manufacturers raised yearly pricing.

Freight issues will be a huge influence on pricing this year as drivers’ wages, driving regulations, and fuel prices are poised to increase costs and limit further availability.  Expect lead time to extend somewhat as manufacturers may struggle to find drivers for loads.

2018 has the makings for a strong year in housing if the chaos in Washington D.C. settles down and an unexpected crisis is not created.  The fundamental looks okay except for the affordability issue, which grows worse daily.  Ultimately, the lack of affordable housing could be the extinguisher of any long-term growth in the housing market.  

Builders should beware pricing projects for March and April with January’s pricing as warm weather and new tax cuts could make the markets volatile.  Now is the time to install price adjustment clauses in your contract.  If you would like one based on this Index please email Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. for a copy.

Until next month, stay warm and get ready for a busy 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 This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

 

 

December 2017 Whole House Commodity Index

DEC-2017 Graph-reduced

WHOLE HOUSE COMMODITY INDEX - December 2017

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:

  • 2x4 yellow pine was up 9.4 percent as demand for truss material and treaters spur a continued backlog created by the hurricane season.  2x6 pine added 2.0 percent while 2x12 pine was flat.
  • The spruce lumber markets retreated as clarity on duties and the demand equation changed with the winter season.  Spruce studs dropped 3.9 percent while 2x4 spruce dropped 5.4 percent, mirrored closely by 2x6 spruce at a drop of 4.4 percent.
  • OSB sheathing continued full retreat posting a 20.7 percent drop while CDX pine remained flat.  Oversupply and winter could produce more downward pressure.
  • Truss prices increased .4 percent on higher 2x4 cost.
  • It appears the markets are in a wait and see mode as the housing demand is sorted out.

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

November 2017 Whole House Commodity Index

wh graph 17-11-16 mc

 

WHOLE HOUSE COMMODITY INDEX - November 2017

by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index for November dropped 1.3 percent to $32,729.15 as sheathing products went into full retreat.  As the weather turns cooler and the hurricanes of fall grow dimmer in memory, it is obvious the market is overpriced in sheathings.  Continued declines in sheathing are expected and as the snow begins to fall and consumers begin thinking about Santa Claus expect other products to follow.

Here are the notable price movers in the Index for the last 30 days:

  • Wire mesh dropped 3.7 percent and foundation rebar 13.5 percent on heavier availability.
  • CDX dropped 1.8 percent while OSB sheathing collapsed 26.0 percent on overpricing during hurricane season.
  • Pine dimensional lumber was down in all sizes.  2x4 was off 1.6 percent, 2x6 down 2.9 percent, and 2x12 pine down 6.8 percent.
  • Dimensional spruce increased on the continued problems between the United States and Canada in regards to the Softwood Lumber Agreement.  2x4 spruce jumped 8.3 percent while 2x6 spruced added 7.3 percent.  Oddly, spruce studs printed down 1.4 percent as buyers tried to sort this complicated issue out.

Manufacturers and suppliers are beginning to announce price increases for the first quarter.  Thus far, price increases have been announced in drywall, doors, and windows.  Based on current projections, some of these price increases will probably stick while more aggressive increases will be subjected to heavy market pushback.

Winter weather and the politics in Washington, D.C. will probably drive the markets the most over the next few months.  Both are impossible to predict and it could be like spinning a roulette wheel—boom or bust. There should be minimal upside risk in pricing through December based on the high prices of the last few months.

I hope you have a blessed and happy Thanksgiving.  Please remember those who are less fortunate.

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. .

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