March 2018 Whole House Commodity Index

18-03 March GRAPH web

WHOLE HOUSE COMMODITY INDEX - March 2018

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

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for March 2018 increased 3 percent to $35,046.02, as tariffs and trade issues involving Chinese steel and Canadian lumber continue to angst the commodity markets.  The surprise announcement caught many off guard, as they believed the threat of steel tariffs was being overblown. The 25 percent steel and 10 percent aluminum tariffs change the pricing dynamics of the residential housing market, because most products in the housing sector rely on imported steel and aluminum.  

The Index for March is at a record high and there appears to be little signs of abating. Considering the following facts, the building supply sector is overheating, and the inflation demon is truly at play.

  • The Index is up 7.4 percent since December 2017.
  • Since December, rebar is up 44.2 percent; wire mesh is up 9 percent; 2x4-16 yellow pine is up 32.1 percent; 2x4- 92 5/8 spruce studs are up 14.5 percent; 5/8 CDX is up 17.1 percent; trusses are up 13 percent; 2x4-16 spruce is up 18.4 percent; and 1/2”4x12 drywall is up 14.6 percent.

Although we are in the dead of winter, the inflation since the first of the year has rivaled any hurricane period. 

In regards to this month’s report, the Index continued to increase over the last 30 days, and here are the notable movers since mid-February:

  1. Wire mesh is up 2.4 percent and rebar is up 7.4 percent.
  2. 2x4-16 pine is up 6.5 percent while 2x6 pine added 2.4 percent and 2x12 pine declined 2.4 percent.
  3. 2x4 spruce studs added 6.9 percent while 2x4 spruce increased less than 2 percent and 2x6 spruce was down slightly.
  4. CDX plywood added 10.6 percent while OSB sheathing jumped 9.8 percent.  
  5. Roof trusses edged up 5.2 percent on higher wood costs.
  6. New price increases by most roofing manufacturers during the first week in March added almost 5 percent to shingle pricing.
  7. Spring has brought inflation to 4x4 treated posts, which added 15.1 percent.
  8. Aluminum drip edge and vents were up almost 6 percent on higher demand and cost—this was before the tariff announcement.  Since the tariff announcement, proposed increases have been announced upwards to 25 percent.
  9. Windows were up 4.5 percent on increased cost in manufacturing.

Substantial inflation has been seen in the building supply sector over the last 30 days, and there appears little momentum for lower prices anytime soon.

The steel and aluminum tariffs are not completely reflected in these costs, which is disconcerting.  Even worse, real supply concerns are heightening every day. The sudden, unexpected announcement of tariffs by the President froze the import markets immediately and orders were cancelled by exporters.  Because uncertainty remains as to which countries will be affected and the unknown retaliatory responses of countries being tariffed, the supply chain is broken. This may result in shortages of product later in the spring and summer. 

Availability angst is growing with building supplies that depend on steel and aluminum.  Certain foundation metal products have already become almost impossible to find and concerns about nails and fasteners are growing.  Demand for metal roofing accessories has already stressed those supply chains and manufacturers are announcing immediate 25 percent increases with warnings of supply disruptions.

The price increases are coming and nothing barring a total collapse of the housing market is going to stop them.  Builders should work with their vendor partners to plan needs and ensure adequate supplies are available when they need them.  Allocations may come in certain sectors, and supply availability to customers may be dependent on prior buying histories.

Currently, the markets are in a highly inflationary period and the markets are extremely 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.

Builders today should update bids and be mindful of future project pricing.  Just as important, communicate future needs with your suppliers. Now is the time when true business partnerships will pay the most dividends.

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. .

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. .

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