Whole House Commodity Index 12-16-2013

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The Ro-Mac Lumber Whole House Commodity Index for December dropped .4% as an early start to winter cooled sales down across the country.  As one veteran observer pointed out, it appears the northern United States will have a real winter this year.  Only four items on the index increased compared to nine items which decreased.  The vast majority of the items remained flat in pricing.  Nothing real impressive either way.

Here are the few notable price changes. 

  1. Wider width pine dimensional lumber was up 3.1%-5.1% while narrower 2x4 pine settled 4.5% lower.
  2. Dimension spruce was down on average 9.1% with studs down a little less than 5%.
  3. In sheathing products, OSB was down 3.1% while CDX pine remained basically flat only giving back .4%.
  4. Rebar was up less than 1%.

 As you can see there is not much happening.

 Now it is time for the big question. 

As we have warned for the last several months, countless companies and segments of the markets have announced significant increases after January 1st.  If most of the United States is in the midst of a real winter and demand is slow to build, which companies and segments of the market are willing to push announced price increases?

Plus, new mortgage rules via Washington D.C. could damper housing demand next year.  This is above the typical government dysfunction of budget battles, health insurance, and over regulations which have been impeding new housing growth this year. 

Probably the most interesting comments I’ve heard lately is how business improvement is more confined just to the larger areas.  Many vendors have pointed out that in rural areas of the South, the economy is still very bad and those areas continue to suffer badly economically.  There is a softness permeating the market and while the winter weather may be blamed, it is still debatable.

Keep one thing in mind about the permit numbers in Florida and other areas.  Many local governments are re-instituting impact fees or increasing building permit fees in January, plus the new mortgage rules also start in January.  Year-end permits numbers could be distorted leading to a false optimism, this tempers my optimism a little for 2014.

Over the next 30 days manufacturers and mills will try to firm and increase pricing, but I am not sure the market or weather will cooperate.  Keep a close eye on the market and bid projects with increases in mind, but with the hope of a pleasant surprise when the purchase orders are actually cut.

Finally, Have a Merry Christmas and joyous, prosperous New Year.  May God Bless you, your family, and business.

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 Index 11-18-2013

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for November 2013 settled at $29,309.57, which is 0.3% below the prior month.  In the last 30 days, the market dropped and then began to rise.  It appears within the next week or so it will recover all losses.  Since last November, the Index is up 6.3% and the building supply market continues to show higher inflation than many other sectors.  Higher delivery costs and higher wages for skilled workers appear to be the culprit.

 The following are the notable price movers since last month: 

  1. Price increases for domestic steel pushed rebar prices up 4.4%.
  2. CDX pine plywood dropped 5.3% while OSB sheathing closely followed at 5.8%.  Both markets have been trying to firm in the last week.
  3. Narrow 2x4 pine dropped 3.2% while wider width 2x6 and 2x12 pine increased 2.4% and 3.3%, respectively.
  4. Spruce studs eased up 2.2% while 2x4 and 2x6 spruce increased 6.3% to 8.3%.
  5. Truss prices dropped 0.4% on lower 2x4 costs.
  6. Engineered wood dropped 2.7% as suppliers searched for customers.
  7. Interior doors increased 3.4% on higher manufacturing costs.
  8. PVC trim boards dropped 2.9% as competitors fought for market share. 

There is an unsettledness in all of the markets as 2013 ends. 

This month’s report is not as important as the following message:  Be prepared for higher prices after the first of the year.  Drywall, windows, doors, roofing, and insulation companies have all announced significant price increases after the first of the year.  Many companies are struggling with profitability, and extra costs from government and increased labor costs are going to force them to increase their pricing. 

If you are builder who is bidding projects for construction after January 1, 2014, you should build in an inflation factor for materials of 3% to 6%.  It really depends on what the commodity markets do, but I suspect mills will jump into the price increase party.  Throw in that many builders will have to pay more for labor and there could be some real sticker shock.  Good planning now could save you thousands of dollars later. 

Now is probably a good time to put a price escalation clause in  your 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 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 10-15-2013

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for October 2013 increased in price for the fourth month in a row after a 9.7% plunge from April’s all-time high.  In the last 30 days, the Index eased up 0.5% in price to $29,391.48.  Although the increase is modest, the pricing level remains very high. 

Historical comparisons will put this October’s Index price into clear view:

  • This October’s Index price is 10.3% more than the same time in 2012.
  • Since the plunge in May, the Index has picked up 1.1% of the 9.7% previously lost.
  • This October’s Index price is the second highest in the history of the Index (the Index commenced in April of 2005).

Needless to say, prices have remained firm despite the uncertainty from Washington, D.C.

In total, the market is being pushed by supply rather than demand.  Housing starts and permits have been volatile, with each month seemingly showing a new direction.  Most suppliers and dealers, probably because of necessity, are not loading their wagons with inventory because cash remains king and the folks in Washington, D.C. have everyone spooked. 

In my view, this is creating a needs-based market.  If you see how commodities are being priced, it is almost species and style specific--linked to availability.  For example, 8’ boards may be flat-to-down in price while more popular 16’ boards could sell for $20 per thousand premiums. 

Each month, building supply manufacturers are searching for ways to increase price; however, a lackluster hurricane season coupled with volatile demand have forced some to pursue targeted pricing.  While many would like and probably need price increases, the market may not be able to stomach them.  There is a possibility more thinning of the herd could occur.

Here are some notable market movers over the last 30 days:

  1. CDX pine plywood was up 4.9% and OSB sheathing followed with a 3.5% increase.
  2. Spruce studs were up almost 3% while 2x4 dimensional spruce increased 7.2% followed by 2x6 spruce at 4.9%.
  3. 2x4 narrow width dimensional pine was up 8.1%, and 2x12 wide width jumped 6.8%, but (in between) 2x6 pine decreased 2.4%.
  4. Truss prices remained basically flat, adjusting down 0.7%.
  5. Most rebar and foundation metal dropped 1.1% to 4.2% in price as shipments from Europe and Asia are oversupplying a softer than expected American new home market.

For many contractors, window supply remains a problem as manufacturers see the new energy code forcing most markets to vinyl products.  This coupled with plant closure is creating a real problem for contractors using aluminum windows.  Demand will determine how long this will continue to be a problem.

Trucking remains a big issue with the new Department of Transportation regulation on the number of hours a driver can be behind the wheel.  With increased demand, timely delivery of special and custom products could become an issue.  So, builders should figure longer lead times on these items.  There could be spotty stock inventory issues if suppliers keep their inventories at thin levels. 

What does all of this mean?  The upheaval in Washington, D.C., and its uncertainty, plus the imposition of Obamacare have a lot of people sitting on their hands.  The industry is not preparing for 2014 as they should and God in heaven only knows what business will really be like. 

Geez, instead of making five-year plans many can hardly make a six-month plan.  This will leave mills and manufacturers carefully managing supply to prevent a price collapse.  While there will be intermediate price declines over the next few months, don’t expect a full retreat because most cannot afford them.

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 Index 09-16-2013

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for mid-September can be best described as uneventful.  The Index finished at $29,255.57 or less than one-tenth of one percent.  The few increases were offset by declines, which indicate a rudderless market.  The supply situation and availability of specific products appear to be the only drivers.

The following are the notable movers since last month:

  • Foundation rebar increased 1.4%.
  • 2x4 yellow pine increased 1.7% while wider width pine dropped 4.3%-13.6%. 
  • Spruce dimensional increased 1.5%-8.5% while studs added 3.8%.
  • CDX pine dropped 9.6% while OSB sheathing gave back 4.6%.
  • Windows increased 5.0% on heavy demand.
  • Doors increased single digits due to increased costs.

Many are asking if there is going to be a hurricane season.  If the season remains quiet, then housing activity and controlled supply will be the main factors driving the market.

From this vantage point, there are few factors moving the market.  Chinese activity could potentially move spruce; however, lackluster housing demand will probably temper price increases.  It appears there could be more spotty increases based on particular size or species, which could be very frustrating for builders.  Monitoring supply and pricing is a good recommendation to all builders.

The biggest supply issue in the state of Florida continues to be the availability of windows due to reduced capacity.  While some manufacturers insist availability is improving, thus far on the ground lead times remain extended and quality diminished.  The current availability issue with windows could be a precursor of other building products in the future because the supply chain remains broken with little enthusiasm for major capital investments.  Uncertainty in housing along with inconsistent trends continues to hamper a full recovery in the supply chain.

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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