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. .

Whole House Commodity Index 8-14-13

Whole House Commodity Index August 2013

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for August 2013 increased 0.4% to $29,250.87, predominately on a rebound in dimensional lumber and CDX pine sheathing. After four months of decline in lumber pricing, a bottom and bounce were established, and this bolstered sagging prices in other base building materials. Manufacturers have been very slow to announce price reductions; however, lately, it appears “special truckload savings” and “show specials” are starting to be used to prop-up demand.

The Index has finished within 1.0% of its current value since May, and it demonstrates a sector which is struggling with balancing supply with an inconsistent demand. Since last August, the Index is 4.0% higher--despite the current flat trend.

Here are the notable movers from this month’s Index:

  • Foundation rebar gave back 1.3%.
  • CDX pine plywood was up 7.2% while OSB sheathing headed the opposite direction by 8.9%.
  • Felt prices eased down 1.9% on special pricing.
  • 2x4 #2 yellow pine was up 12.2% while 2x6 increased 2.8% and wider width 2x12 surged 8.5%.
  • 2x4 dimensional spruce increased 5.5% with 2x6 #2 SPF jumping 8.4%.
  • Truss pricing increased 3.5% on higher cost for dimensional pine.
  • Treated pine was up 10.1% on the surge in yellow pine.
  • 30-year architectural roofing dropped 5.4% on “show specials” while manufacturers attempted to make strip shingle increases of 1.4% stick.
  • Drywall pricing decreased on “special buys” from 5.3% to 7.3%.
  • Wood base moulding increased 7.1% on tighter supply.

The bump in wood products kept the Index from dropping this month.

Spotty inconsistent demand; uncertainty in Washington, D.C.; and, market fear of the hurricane season seem to be the factors driving the market the most. Like an insomniac tossing in bed, this market is all over the place. This week, an increase in spruce futures fueled by a possible speculative large buy added more anxiety to the market.

The recent 1.0 point increase in mortgage interest rates appears to have an effect on the housing market. At this point, it is hard to imagine demand exceeding the first six months of the year. The hurricane season probably poses the biggest threat to pricing increases over the next 60 days, and it is anybody’s guess. For builders, the word is “cautious”. Contractors should be cautious quoting the current much lower prices for long-term projects.

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 7-15-13

Whole House Commodity July graph

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index for July increased 0.2% to $29,132.99, due primarily to the strength of popular lengths of dimension spruce and pine. In April, the Index hit its all-time, eight-year record high of $30,023.64. Since that point, it decreased 2.7%, but interestingly, the Index has priced out within a 2/10 range since May. This is not to say that lumber commodity pricing hasn’t dropped since May, but it is an indication that other material scopes have increased in price. A strengthened wood commodity market will have a greater impact on the Index in the future.

May’s Index cost is 5.5% more since the end of 2012 and it is 8.1% higher than last July. Something to consider is that in 2012 the cost of the Index increased 4.3% and I believe it is poised to follow that direction again. Here is my reasoning.

  • Inventories on the ground are woefully low and the recent activity in the lumber and plywood market indicates that purchasing managers understand that costs are probably at the bottom of the cycle. Concerns about a minimal drag in housing due to higher interest rates will be offset by a steady demand in most areas.
  • Trucking is a problem for many areas and the last two weeks of fuel cost increases will not make that get any better.  Hand-to-mouth inventories can create real hunger in the supply channel if there is an inability to have the product delivered to dealers.
  • Rain in the south has been unmerciful for nearly a month and log decks will dwindle. Historically, long-term rain patterns affect supply, especially in wider-widths. Stronger truss production in Florida will put added pressure on southern pine markets over the next few months.
  • Many dealers have a growing weariness about supply. While there may not be shortages in various supply scopes in the building material supply chain, there are definitely shipping delays and much longer lead times. Impatient builders may be changing the minds of reluctant suppliers in regard to bolstering inventory levels. Understand, whether by trucking shortages, increased housing demand, or general inventory growth, there appears to be a move away from hand-to-mouth inventories.

There were not many notable cost moves for this month’s Index, but here are the highlights.

  1. CDX plywood was down 6.2% and OSB sheathing dropped 16.5%. However, the last two weeks have firmed up in both lines and this should entice buyers into the market, which could drive pricing higher.
  2. 2x4 #2 yellow pine was up 2.8% while 2x6 pine dropped 2.7% and wider width 2x12 pine settling down at 7.9%.
  3. Spruce studs increased by double digits on higher demand and 2x4 dimensional spruce gained 4.7%. Wider 2x6 spruce gave back 2.9%.
  4. Interior and exterior doors decreased less than 1% on more competitive commodity moulding pricing.
  5. Truss prices were up 2.9% on high narrow width pine and increased costs in labor.

Most items in the Index remained static, but expect higher pricing in shingles over the next month or so, as those manufacturers have announced August increases. Also, expect higher pricing for door and window scopes, due to higher labor and delivery costs.

The biggest problem on the horizon is a shortage of skilled labor. Good subcontractors are highly sought, and many of them are now in the situation of being able to selectively choose jobs instead of searching for work. This week alone, I have been told of multiple stories of subcontractors firing builders for low pay or poor working conditions. Also, there is a real battle for these subcontractors to retain their skilled people. Excellent masons, framers, plumbers and electricians are being paid more and recruited heavily.

For the past five years, builders have fully been in the driver’s seat when it comes to demanding lower prices from subcontractors and suppliers. During that period, many folks in the trades believed that some builders took advantage of a very difficult economic situation. It appears that dynamic is quickly changing. Look for many good subcontractors to fire builders because of hard feelings and low prices as the labor shortage continues to grow.

This is how I can best explain the labor shortage issue. For the last six years, there have been no jobs available in the construction industry and the industry has lost six years of hiring and training the next generation. During that period, there have been a bunch of white-haired skilled craftsman retire or die, which has resulted in a huge brain drain, especially since they had no one to teach. And, about half or more of the workers in our industry lost everything and now are working in other areas with no desire or will to come back. Toss in the fact that most technical schools and colleges have abandoned construction trade training because of the lack of jobs and you now have a huge problem that will take years to resolve.

 Here are my two big pieces of advice to builders this month:

  • If you have great subcontractors working for you, be prepared to defend your position. If you are a builder who has a reputation of brow-beating subcontractors down on price and then nickel and diming everything to setup a back charge, good luck finding good people. If you have a great subcontractor base, you better love and care for them because they will have options and the cost of business is going up. Hesitating to approve a subcontractor increase will send that subcontractor to your competitor.
  • A lot of issues are breaking for higher prices, so I expect pricing to go up in the third quarter. It appears the commodity markets have cemented a bottom and higher fuel cost typically leads to a pop-up in pricing. Builders should update quotes and have price escalation clauses in their contracts. If you would like a sample of a free price escalation clause for your contract based on this Index, contact Rebecca Ballash at This email address is being protected from spambots. You need JavaScript enabled to view it. . Please consult with your attorney before adding anything to your contracts.

Don’t forget the country is less than a month a way from the teeth of hurricane season and a bad storm could quickly change the dynamics. This is the time builders need to protect themselves because the markets could turn very ugly in material cost and labor availability.

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 6-17-13

 Whole House Graph June

The Ro-Mac Lumber Whole House Commodity Index (Index) for June 2013 was $29,064.17, which is only $4 dollars below the previous month. The declines in wood product pricing were offset by a firming of prices in cement sidings and increased costs in truss fabrication labor. The declines have continued over the last month, but the larger drops from a month prior have ceased.

Demand and fuel costs continue to be the main drivers of the market and currently both have settled down from the mid-spring rally. There could be firming attempt at a bottom in the market as dealers are forced to replenish inventories. The wild card this summer as with any summer is weather--tropical weather in particular.

In the first week of June, Florida got hit by its first tropical storm of the year. Even though this storm was primarily a rainmaker, it lends credence to forecasters who are predicting an active year. Major weather events could quickly turn this market, especially if demand continues to improve.

The following are the notable movers in last month’s Index:

  1. CDX plywood was down 10.9% while OSB surrendered 15.3%.
  2. #2 spruce narrow widths dropped 9.0% while 2x6 spruce gave back 14.7%.
  3. Pine dimensional lumber slid with narrow widths in the low-to-mid single digits while wider width pines dropped 13.4%.
  4. Truss prices jumped 6.8% on higher demand and increased labor costs.
  5. Cement sidings jumped 87 cents on increased demand and tighter supply.

The big problem facing every company in the construction industry over the next few years is labor. For the last 6-7 years, the industry has not been adding new young people to its ranks because there were no jobs, while during the same period there have been a huge number of people who have left the industry in the course of regular retirements, deaths and disability. Throw in the fact that there have been a lot of good people who were put out of work in the construction industry and are now doing other things. Let’s face it, not many people are going to return to an industry that wiped them out. We have the makings of a real labor shortage and everyone will be jockeying for good, skilled labor.

The other big cost on labor is all of the new government regulations, which are about to hit, including Obamacare. Businesses in our industry with such a wide variation of salaries from top-to-bottom could be hit much harder than most. Some business people have told me they will either pay overtime or reduce staff, but many are refusing to go beyond the fifty-count in employees.

My forecast and recommendations are simple--be cautious. I don’t see a lot more downside in wood products. As the summer vacations end, expect more demand. Hurricane season concerns me because inventories are so low due to limited cash and market volatility. Any threat or God forbid a major storm in the hurricane zone will have immediate detrimental effects on pricing. Prices will go up quick and high with little warning.

Builders should not quote prices on projects using today’s pricing because there is a good chance that by September or October the cost of goods could be much higher. Price for 30 days; price with an escalation clause or price with pads; don’t put yourself out of business with today’s prices in October.  

Look to the sky or Washington, D.C.; in both cases, it could get stormy.

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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