September 2016 Whole House Commodity Index

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Whole House Commodity Index 
September 2016

By Don Magruder

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for September 2016 fell as wood commodities offset any gains from other building products.  Tropical rains, with no accompanying storms, have slowed the construction pace leaving some to wonder if the market will be drifting lower over the next few months.  With the approaching United States presidential election and the chaos associated with it, many are speculating the close of 2016 will be unimpressive.

Over the last 30 days, the Index dropped 1.1 percent to $30,920.24, which wipes out all increases for the summer.  With chances dimming of any significant hurricane activity the market will have to be its own catalyst to stop the decline. 

Despite the overall decline in the Index, there were areas in which pricing increased due to increases in the cost of labor and operational costs.

The following are the notable movers in the Index:

  • Wire mesh added 6.1 percent and rebar 3.7 percent as the price of metal drifted off the bottom.
  • Garage doors added 5.0 percent on increased steel pricing.
  • Drywall gave back $10 per thousand (or about 4 percent) to meet market conditions.
  • Truss prices dropped 4.2 percent on lower lumber costs.
  • Pine pricing printed down with 2x4 off 9.8 percent; 2x6 down 5.0 percent; and, wide-width pine falling 8.0 percent.
  • Spruce dropped as studs declined 2.1 percent; 2x4 dimensional decreased 3.9 percent; and, wider 2x6 spruce eased down 5.3 percent.

Keep in mind, base building material costs increased in September; however, a falling commodity market covered up the gains.  As these markets adjust back up later, builders could get stung on bids.

The next couple of weeks will dictate what type of fall the housing market will have.  My bet is somewhat flat as Americans try to sort out their political future.  No doubt about it, each side will tell supporters the world will end if the other is elected and that in itself could suppress the market.  Unless there is a surprise hurricane late in the season there will be little to move this market upward.

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. .

August 2016 Whole House Commodity Index

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Whole House Commodity Index - August 2016

By Don Magruder

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for August 2016 gyrated in place, with various fluctuations, which at the end left the Index flat. This could be a sign that the housing market is cooling as some sectors begin to use price to prompt orders. The next four to six weeks of hurricane season will probably determine whether these markets move or stay in place.

The Index finished at $31,264.06, which is almost $4 above the previous record high in July.

The notable movers in this month’s Index were:

  • Wood mouldings retreated 4.2 percent on casing and 5.9 percent on base as supply outpaced demand.
  • 1/2” drywall added 4.8 percent as manufacturers suspended special summer pricing and are waiting to see if weather can jolt demand.
  • OSB sheathing added 3.0 percent while CDX pine plywood gave back a whopping 8.5 percent. These numbers do not bode well for overall demand.
  • Dimensional spruce was up on average by less than 2.0 percent and, in many sizes, flat.
  • Spruce studs added 2.2 percent.
  • 2x4 and 2x12 pine added about 2.0 percent while buyers of 2x6 pine had to pay 8.8 percent more.
  • Treated 4x4-8 posts were down 4.7 percent.
  • Roofing shingles added between 5.0 and 6.0 percent.
  • Vinyl soffit gave back 1.0 percent.

Once again, the market saw a lot of gyrations but very little movement.

Builders should be wary of hurricanes this time of year. Locking in bids for the next month, or so, may be a good idea. Lately, there have been a lot of job delays because of labor shortages and heat. The heat will subside in the next month, or so, but the labor shortage issue shows no signs of abatement, especially with the pending workers’ compensation increase scheduled to take hold October 1, 2016.
Expect items with heavy labor burdens to start increasing by mid-October. Some smaller companies may be forced to capitulate and go out of business. Every day, the small guys are just clapping their hands and closing shop. Make sure you have good subcontractors and be very careful about chasing nickels now, when later you might be paying quarters just to find someone to do the job. Builders who have strong subcontractor relationships should be just fine.

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. .

July 2016 Whole House Commodity Index

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Whole House Commodity Index - July 2016

By Don Magruder

 

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for July 2016 increased 0.2 percent to $31,260.28 and this marks the fifth consecutive monthly increase. The increases this month were primarily from an escalation in sheathing prices as most other wood commodities remained flat to down. The markets at all levels are feeling labor and cost increases, which are pressuring companies to increase prices, but housing has yet to take-off as promised this year. Political and civil unrest seem to be distracting the markets and causing some buyers to sit on the sidelines.

The following are the notable price changes from the Index as compared to last month:

  • CDX pine plywood was up 11.9 percent while OSB sheathing added 4.6 percent.
  • 2x4 and 2x12 pine was down a little more than 8.0 percent while 2x6 pine added 8.3 percent—a real mixed bag and indicative of a just in time market.
  • Dimensional spruce was mixed, with 2x6 spruce falling 1.9 percent while 2x4 spruce added 1.3 percent.
  • Spruce 2x4-92 5/8 studs added 2.7 percent.
  • Roof truss prices were down 2.5 percent on lower pine pricing.
  • Treated 4x4-8 drifted downward 2.9 percent while treated 2x4-16 borate dropped 7.5 percent.
  • Mouldings added a couple of pennies per foot, or an increase of 4.3 percent on casing and 6.3 percent on base.
  • 1/2" drywall dropped 4.6 percent, with market adjustments.

Unless there is a market variable next month, such as a hurricane, the general motion suggests the string of months wherein costs are increasing may be ending. Overall, the amount of this month’s increase was minor and more items incurred downward pressure.

The National Council on Compensation Insurance (NCCI) reissued its new guidelines for the proposed increase in workers’ compensation premiums for the state of Florida. Based on the Supreme Court decision and a new Senate bill, the NCCI recommends a whopping 19.6 percent increase, which will become effective on all Florida companies on October 1, 2016. This is a huge amount and will ripple throughout this industry, which is so highly influenced by already high premiums. Expect much higher prices once the state makes a final decision.

Steel pricing is going up dramatically. From steel construction framing to steel lath for stucco, pricing is going up big time. Multiple increases of 10 and 15 percent are being proposed. Builders should be mindful of projects that take a lot of steel.

Plus it is getting to be the heart of hurricane season. Supply chains remain tattered from the Great Recession and builders should be aware that a real threat or, even worse, a strike on the United States by a hurricane could create real supply problems. At this point, builders should have a price escalation clause in their contracts protecting them against unforeseen events. Now is a time to be cautious.

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, cntact Rebecca Ballash.

June 2016 Whole House Commodity Index

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Whole House Commodity Index - June 2016

By Don Magruder

 

For June 2016, the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) increased 0.7 percent to $31,209.58, which represents a four-month streak of increases.

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