April 2014 Lumber and Commodity Report

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Keep in mind, the lumber and commodity markets are usually the best indicator of the strength of housing, and this month’s report indicates a housing market that is struggling for buyers. The Home Builders Association Wood Commodity Index (Index) for April 2014 declined 6.4%, as declines were widespread in all sizes and species with the exception of wide width pines, which were flat.  Concern seems to be growing as to whether the housing season will gather any momentum after a long winter.

The lumber portion of the Index dropped 6.2% to $374.59 per thousand as western spruce retreated 6.3% to 8.4%.  What makes this even more difficult to figure out is the shortage in trucking and railcars.  If demand were strong, coupled with these transportation issues, pricing should have skyrocketed by now.

The sheathing portion of the Index fell 6.5% to $264.24 per thousand as mills searched for buyers and no one wanted to be stuck with overpriced panels.  CDX pine panels have been very resistant to lower pricing; however, mills finally had to capitulate to lower prices. Despite the decline, as of mid-April, buyers still remain with their hands in their pockets only buying what they need. 

Many concerns are raised by a commodity market during a time that is usually the heart of the housing season.  In the last few years, buyers retreated to the sidelines in mid-May, and this year the selling season has not kicked-off two weeks before May.  Will there be a late building season or no building season at all?  The lower prices may be good for those who have work, but prices are getting to a level in which mill curtailments will begin.  Frankly, if this occurs I am not sure if everyone will survive.

This is the one time when everyone should look to a firming market as an indicator housing is picking up.  At this point, uncertainty is fully in charge, which  does not bode well for builders.  Although there could be some downside risk to the market in pricing the upside is huge. 

If for some reason, the home selling and building season cranks up during the next few weeks, the prices of today will not be around long.  Protect yourself on projects bid for later in the spring and summer. 

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County.  To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

March 2014 Lumber and Commodity Report

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The Home Builders Association Wood Commodity Index (Index) for mid-March 2014 increased 3.3% to $332.88 per thousand as volatility entered the market.  Manufacturers and mills desperately want bad weather to be the reason for sluggish housing numbers, and many are preemptively raising prices expecting a strong spring selling season.  Over the next 30 to 45 days, the housing market should have clarity--either it is the bad weather or economic conditions.

The dimensional lumber portion of the Index increased 2.1% to $399.34 per thousand with single digit increases in spruce and increases of 4.5% to 7.0% in wide width pine.  Much of the movement in the market was driven by specific availability of one species and size over another. 

The sheathing portion of the Index was pushed 4.7% higher to $283.24 per thousand as strong price runs in CDX pine plywood led the way.  1/2" CDX added $17 per thousand while harder to find 3/4” T&G jumped $30.  OSB sheathing was uneven in its increases with thicker panels jumping less due to demand.  The overall view of the market is firm; however, the direction is not certain as mills wait on an improving housing market.

One important factor to keep in mind and probably a good indication of the housing market’s strength is that last March this Index was $450.46 per thousand.  This year’s Index price is down a whopping 26.2%, which could mean one of two things:  housing is that weak or there is a lot of upside to this market.  Builders should remain very diligent in pricing current projects and realize prices could go significantly up in two months.  Now is the time to have a price escalation clause in your contract.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County.  To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

February 2014 Lumber and Commodity Report

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The Home Builders Association Wood Commodity Index (Index) dropped 1.8% to $322.19 per thousand from mid-January to February.  Most of the blame for the decrease is pinned to bad weather.  For the first time in nearly a decade, the Northern and Southern areas of America are having a very harsh winter, which appears to have broken a long running pattern of early spring building spurts.

The lumber portion of the Index dropped 1.0% to $391.25, as heavily weighted items gave up pricing.  Most spruce items (with the exception of 2x4-16) traded in a very narrow, flat range.  Pine pricing fluctuated with length demand.

The direction of the sheathing portion of the Index was unmistakably down, as average sheathing prices dropped 2.5%.  CDX pine, on average, gave back nearly $10 per thousand while OSB sheathing fluctuated downward $5 to $10 per thousand based on thickness.  Most decreases were blamed on slower demand linked to the weather.

From January to February, the weather was indeed a factor; however, there are two different ways to view this market.  First, the drop in pricing should have been more given the nasty nature of the weather.  Second, should it all be blamed on the weather or have the headwinds of new mortgage rules and this economy slowed down the market?  How much longer can the weather be blamed?

Some analysts suggest the lumber market is poised for a huge run-up in prices; however, thus far many dealers are keeping their hands in their pockets.  This year could be a typical selling cycle when winters were bad.  Back then, prices cratered in January and February and then made huge runs late March through early June.  That remains to be seen.

One thing is for sure, builders should be cautious bidding April and May projects with today’s numbers.  My suggestion is you put a price protection clause in your bids and bid these items with a good pad.  Remember, you can always go down but never go up.  The market is in uncertain times and the smart people will be very cautious.  

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County.  To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

January 2014 Lumber and Commodity Report

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The Home Builders Association Wood Commodity Index (Index) for January increased 3.5% to $328.10 per thousand as manufacturers and mills constrained supply to overcome the snow, ice, and freezing weather from a deepening winter. Compared to last January, the Index is down 23.1%, which may indicate a more traditional spring run in business or an overall softening.  A real winter is affecting the northern regions; there is no aftermath of Hurricane Sandy; and, all of the hope and promise from a second term Obama administration has evaporated. 

For the month, only two items declined in price and increases seemed to be driven by size and species--nothing across the board.  Stud spruce products were mixed to flat in pricing while dimensional spruce price increases fluctuated from 4.1% to 8.1%.  2x4 treated gave back 2.7% as manufacturers searched for buyers. Wide-width pine increased 1.1% to 5.2%, but a floor and general direction for pine was being established. 

Sheathing products recouped some recent losses in price; however, pricing still remained lower than most expected. CDX pine plywood was flat to up 2.6% while increases in OSB sheathing enjoyed very modest $13-$14 per thousand increases.  

It appears most mills are desperately trying to hold onto previous increases, but harsh winter weather could create cracks in pricing. The National Home Builders Association is forecasting a very optimistic 1.1 million in housing starts for 2014 with most projecting lower numbers.  Actual annual starts have not reached one million and those numbers have only trended for a couple of months.  If strong housing starts do not begin the year trending a million plus starts, expect lumber prices to remain in the doldrums.  Changes in mortgage rules and higher interest rates could provide enough headwinds to limit housing starts. 

The next month or so will dictate whether 2014 is for real in housing starts or just another false blip. Builders should be cautious in long-term bidding, just in case the starts materialize. Everyone should incorporate some form of price protection clause in their contracts.  My personal belief is that without some impetus from heavy spring storms in the south, cheap interest rates, and more flexible mortgage rules, pricing will stay flat to down as will housing starts.  

Many other scopes in the building supply industry have pushed and announced price increases after the first of the year. Windows and doors are up 3%-5%; drywall is up $30 per thousand; and, fuel charges have increased across the board. Spring demand will decide if these increases will stick. 

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

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