Whole House Commodity Index 5-15-13

Whole House Commodity May 2013

Cracks in the commodity market in April have developed into what appears to be a short-term correction this month. As of mid-May, the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) dipped 3.2% to $29,068.11, which is still 5.5% higher than December 2012, and the Index’s third highest price since its inception in 2005. The sharpest declines occurred during the end of last month and the first week of May with the week beginning the process of forming a bottom.

Don’t forget, this Index is based on wholesale pricing, and pricing on the contractor/retail level for most dealers is about 2-4 weeks behind as inventories are replenished.

Over the last several months, I have warned our readers about a softness entering the market because, in my view, pricing went up too fast too quick. This modest give-back is a result of mills and manufacturers not understanding the Mendoza line--where pricing will stop projects.

Currently, there are two competing stories in the commodity markets. The first story is this market adjustment will continue and prices will moderate; and the second one is, as you may have guessed, this market is temporary because supply remains tight.

Here is my three-cent opinion for the next two months. Pricing will fluctuate modestly up-and-down for the next couple of months until it finds a soft landing. There will be some items dropping in price, but others will firm because there is simply not enough in the supply chain. The housing market should continue to improve spurred on by huge increases in the stock market and a general improvement in the economy. Any modest increase in demand will put upward pressure on commodities; even now, suppliers’ inventories are woefully low.

I expect prices to firm later in the summer, as hurricane season and an increase in housing demand collide, and the harsh reality of a broken supply chain is exposed. Volatility will be the buzz word the last half of 2013. My advice to builders--the price you bid a project today may be totally different in two months. Utilize a price escalation clause, and in the case of hard bid situations, quote pricing established during the peak months of March and April. Strap in--this ride looks bumpy. 

Here are the most notable price changes for mid-May.

  1. Foundation wire mesh dropped 3.3% and steel rebar dropped 1.7% on lower demand.
  2. CDX pine plywood gave back 7.9% while OSB retreated 19.8%.
  3. Roofing remained firm, with the exception of felt which dropped 1.8%.
  4. Narrow width pine dropped 9.7%-11.7% depending on width, while wider width pine erased 16.8%.
  5. Dimension spruce dipped on average 11.5% while studs retreated almost 16.5%.
  6. Truss pricing was off 4.0% on lower pine pricing from late April.
  7. Single digit increases in door unit pricing was prevalent on cost increases in jambs and mouldings.
  8. Engineered wood edged up by the single digits on increased demand.

On the horizon, there are increases announced in roofing, insulation and windows; however, it remains to be seen if these new prices will materialize. One serious issue for most builders is window availability. With a historical number of window manufacturing facilities closing their doors during the last five years, coupled with the lack of skilled labor, window products have been experiencing huge delays. In doors and windows, builders will have projects delayed if they do not place their orders well in advance of their needs. I see little hope in the window and door issue resolving itself in the next few months.

The worst thing a builder can do is quote May or June pricing for a project in October. It would not surprise me at all to see the market power back to March and April levels on some items, so be careful.

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

Whole House Commodity 4/15/13

  April Whole House Commodity

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) continued a four-month string of price increases in April despite some cracks developing in some lumber dimensions. In mid-April 2013 the Index priced out at $30,023.64, which is a record high and up 2.6% from the prior month.

To put April’s price into context here are four of the most notable facts:

  • The Index has increased 8.9% since the end of 2012 with pricing going up each month in 2013.
  • From last April, the Index has increased 10.7%, which translates into a significant rate of inflation to build a home.
  • Prior to this year, the record high was October 2005, a month after Hurricane Katrina had decimated New Orleans and in the midst of the housing boom. This month’s Index is 4.6% higher than October 2005.
  • Since 2007, prices in the Index have always increased between the months of April and May. This does not bode well for a drop in price next month.

The market continues to have major influential factors, such as hail storms in the south, stronger housing starts, and limited supply as a result of unconfident manufacturers who are unwilling to take a chance in the current political environment.

For the most part, there was not a massive price increase in all areas. Some prices dropped; however, on a few of the big use items the prices soared, which is why the Index increased so much this month. Listed below are some of the details:

  1. Foundation wire mesh increased 2.2% while rebar (for the most part) remained flat.
  2. CDX pine plywood soared 12.5% on limited available production. The full effect of the closure of the Georgia-Pacific Hawthorne, Florida mill is really being felt right now. We have been told by experts in the market that the mill will not reopen due to excessive government requirements. No easy solutions to the CDX supply issue are evident at this time.
  3. Oddly, OSB sheathing dropped 2.4% as production increased and word of new production being added soothed the markets.
  4. The stud market has been on fire.       2x4-92 5/8 SPF studs increased 11.8% on high demand; however, dimensional 2x4 spruce dropped 3.7% while 2x6 spruce gave up 1.4%. It is odd that studs did not follow the trend of the entire species.
  5. Pine dimensional lumber was down with 2x4 dropping 4.8%, 2x6 giving up 4.1%, and wide width pines trying to hold onto gains only slightly down 1.4%.
  6. Truss prices increased 6.5% as truss manufacturing facilities have finally worked through most of their lower cost pine inventory.
  7. 4x4-8 treated posts gave up 2.9% as mills searched for buyers.
  8. The first round of shingle price increases took place in the last 30 days and it appears these new prices are sticking.       Strip 25-year shingles increased 2.7% while 35-year architectural shingles surged 5.0% in price. More shingle price increases are scheduled in the next few months. With all of the heavy storms in the south, expect those price increases to also stick.
  9. Moulding prices edged slightly higher on increased costs.
  10. Vinyl siding increased 2.7% on higher manufacturing and fuel costs.

Notably, some cracks have developed in this four-month price run; however, at this time it is difficult to ascertain if these cracks will foretell a full-fledged market correction. The historical increases that occur between April and May, plus the storms in the south, and the accelerated reconstruction efforts in the Hurricane Sandy area because of warmer weather will probably keep pricing firm.

There seems to be a consensus that high pricing is beginning to affect demand as prospective buyers are putting projects on hold. Satisfactory appraisals are still very tough to acquire by many new home buyers, so a 10.7% year-to-year increase may be too much--time will tell. My recommendation is that builders should limit the time period for which a bid price is good. Times like these are the reason why you should include a price escalation clause in your contract.

If you would like a copy of the price escalation clause (which is linked to this Index) for your contract please contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. .

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

Whole House Commodity 10/12/12

October Whole House

The Ro-Mac Lumber Whole House Commodity Index (Index) slumped 2.4% to $26,643.27, primarily on lower prices in wood commodities and market pricing for roofing products. Supply appears to have outpaced demand for the first time in 2012, which seems to be softening somewhat. Many in the supply chain belief the uncertainty in the market will remain until the outcome of the U.S. presidential election. This should keep prices flat, as most numbers appear to have bottomed out.

The next few months could be negatively influenced by the election, holidays, and a forecast of a colder winter. The market will probably find a cradle to sway back and forth in over the next three months with spikes in certain species and sizes, as supply does not match demand. Builders should be very aware to not price next February’s projects at October’s pricing.

Here are some of the notable price movers this month:

  1. Foundation rebar down 12.5%.
  2. In sheathing 5/8” CDX plywood down 5.2% while 7/16” OSB retreated 24.8%.
  3. Pine dimension printed down with narrow 2x4 dropping 1.3%, 2x6 down 8.6%, and 2x12 gave up 15.7%.
  4. Spruce dimension heading down with studs dropping 12.8% while 2x4s were down 4.3% and 2x6s off 5.9%.
  5. Market pricing dropped architectural shingles 5.8%.
  6. Smaller metal connectors’ prices dropped randomly in the single digits.
  7. Trusses were down almost 1% on lower pine costs.
  8. Rolled foundation plastic increased 4.7%.

All eyes are on the presidential election. For many, the results will determine the market direction if real certainty can be achieved. It appears that most activity is on hold for the next 30 days, until the political dynamics are sorted out. This election really does mean a lot this year.

The forecast this year is for a much colder winter compared to last year. If that occurs, sales compared to last year could really look dismal, which could damp down enthusiasm. Hold on, the next few months could be a little treacherous.

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

Whole House Commodity 11/15/12

November Whole House Commodity

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for November surged dramatically on the ill effects of Hurricane Sandy’s direct hit on the Northeast United States. The Index jumped 3.4% over the last 30 days to $27,559.93, and is a whopping 11.8% higher than just one year ago.

Hurricane Sandy is the type of event I have fretted and warned about for some time now, because it could expose the true frailty of the country’s supply chain. In my view, the Great Recession has resulted in supply chain destruction and the means for the country handling spikes in demand due to disasters is constricted, which will lead to longer lead times and higher pricing. Builders and dealers should also understand these spikes are just the first blows to the supply chain; expect other areas such as drywall, roofing, windows and doors to be under severe pressure later.

Then there is the impact of the election. It seems this election only ensured one thing--uncertainty. The same people at all levels are in charge, and it looks like the country is peddling very hard toward that financial cliff. Most companies’ expansion plans are now on hold as business leaders work to figure out how they are going to navigate all of the new regulations that are about to be crammed down their throats. This uncertainty combined with emboldened federal regulatory policy may be the final blow for companies barely hanging on.

The following are the big movers in the Index:

  1. Masonry rebar increased 4.4% on higher scrap pricing.
  2. CDX sheathing jumped 7% while OSB sheathing increased an unholy 27.3%.
  3. Felt was up almost 2% on increased demand.
  4. Dimensional 2x4 pine was up 19.2% with 2x6 pine following at 18.1%, and wide width pine up 9.1%.
  5. The heavy increases in pine pricing lifted truss pricing 8.6%.
  6. 2x4 #2 spruce increased 15.4% while studs followed along with a 16.8% jump; however, 2x6 spruce only increased 6.0%.

Builders should keep in mind that most of the country’s drywall manufacturers have announced a whopping 30% increase in drywall as of January 1, 2013, and Hurricane Sandy’s massive rebuilding could lead to outright allocations.

However--and this is a big however--if the folks in Washington, D.C. allow this country to go off the fiscal cliff then pricing will not be an issue, because the country will probably plunge back into a recession. The next six weeks are very important; let us hope common sense is discovered in our nation’s capital.

My recommendations for builders are:

  • Don’t extend long-term quotes without price escalation clauses.
  • Plan sooner and expect delays in special order items.
  • Develop strong relationships with suppliers who you believe will be here in six months.
  • Stay in touch with suppliers to keep abreast of price and supply issues.

Finally, Thanksgiving is less than a week away. We all have so much to be thankful for--count your blessings.

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

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