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. .

Whole House Commodity 1/15/13

January Whole House Commodity

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) has been monitoring the wholesale cost of the building materials to construct a 2,200 square foot home since April 2005. In almost seven years, the highest cost month was October 2005 in the immediate aftermath of Hurricane Katrina when the Index reached $28,692.71. Amazingly, in the first two weeks of January 2013, the Index reached its second highest level of $28,519.91, which is downright spooky.

Prices have gotten so high that many buyers fear a correction is around the corner; so, conversely, most are buying “hand to mouth” just what they need. This in itself is exacerbating the markets. In my view, pricing in this market has three options:

  1. Continue to increase as mills and manufacturers continue to manipulate the supply side of the equation.
  2. Firm and flatten out for a month, or so, as dealers and builders try to digest the new pricing in an effort to pass it along to consumers.
  3. Collapse as the market pricing went up too high too fast for a market that cannot support it.

At this point in the housing cycle, it appears there is a greater downward risk in pricing than upward. Such huge increases in pricing will subdue building activity and it appears in some markets, especially metal, cracks are starting to develop in the upward motion.

Here are some interesting notes about this month’s Index as compared to last month and also last year.

Last Month:

  1. Prices increased 3.5% on heavy lumber and OSB sheathing increases. Pine lumber was up in the 15% range; OSB sheathing added in the 20% range, depending on thickness; spruce dimensional was up 8.5%; and CDX pine plywood jumped 6.7%.
  2. Trusses added nearly 4% in cost on higher lumber cost.
  3. Many companies implemented $5 per thousand fuel charge increases as high diesel prices continue.
  4. The much ballyhooed drywall increase for the first of the year and most items increased 17.4% to 20.6%. This is a huge amount, but the drywall manufacturers did get some bad news--a lawsuit alleging price fixing. Many contend this lawsuit could have real legs.
  5. Insulation increased in the 5% neighborhood as these companies sought to share higher fuel and production costs.
  6. Foundation rebar gave back 2.7% as it may be the first product to indicate a crack in the upward price movement.

For the Year (Price Comparison Since Last January):

  1. Plastic 6mil foundation poly is up 9.5% while foundation wire is down 4.8% with foundation rebar retreating in price since last year 7.0%.
  2. Masonry sand was up 9.3% primarily on higher fuel costs.
  3. CDX pine plywood increased 12.9%.
  4. OSB sheathing increased an astonishing 109.7%.       The cost is up more than $6.40 per sheet.
  5. 2x4 pine is up 69.8%; 2x12 pine is up 43.4%; and 2x6 pine is up 58.5%. These are huge yearly increases.
  6. 2x4-92 5/8 spruce studs are up 41.8%.
  7. 2x4 spruce dimensional lumber is up 48.7% while 2x6 spruce lumber increased 50.2%.
  8. Truss prices increased 21.1% since last January primarily on much higher pine prices.
  9. Poly insulation board managed a 3.3% jump in price.
  10. 3.5” thick insulation increased 22.1% in price while 9.5” insulation added 32.4% in price.
  11. 30-year architectural shingles increased 8.5% since last year.
  12. Roll roofing added 14.3%.
  13. Drywall prices versus last year were up in the 15% range primarily from the increase which occurred this January.
  14. Windows increased in price 14.3% while sliding glass doors added 11.6%.
  15. Wood molding increased in the plus 8% range.
  16. Door pricing added 1.8% to 7.7% depending on the style.
  17. Garage doors increased 4.8% while openers added 3.3%.
  18. More competitive pricing in cement siding resulted in a decrease of the plus 10% area.

Also keep in mind that roofing manufacturers have announced another 10% to 13% increase in February. In Central Florida, cement contractors are being told to expect a $5 per yard increase in concrete and 8-cents increase in blocks. Then there are the fuel surcharge increases--the price at the pump is showing more pain lately.

The price increases in all areas of the building supply chain have been so great over the last 12 months that if a builder or dealer did not pass them to their customers then their ability to be an ongoing concern could be in question. It is very possible in the next few months there could be more closures of builders and dealers as accountants break the bad news of the negative affects these huge price increases had on balance sheets.

What is the direction and what is the proper play? My view is the market is over baked and at these levels I don’t mind eating “hand to mouth”, because if the markets start losing their steam and start dropping, it will be like trying to float a brick in a pond.

The risk if these market cost levels are now the new normal is simple--shortages if housing starts to boom, or if there is a bad natural disaster. I must admit, this warm spring could bode very badly for a strong spring tornado season.

How does a builder quote a project? Builders must price with a price protection clause and measured time the price is good in the contract. Do not price jobs banking on a future drop in price later in the spring.

We are in unchartered territory. This high of pricing during this time of year with housing starts less than one million and no looming hurricane is something I have never seen before. This is a time to be cautious.  

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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