Whole House Commodity Index 02/16/15

TheGraphWEB

 

If builders, manufacturers, and mills hoped February would offer some positive direction for the markets then all will be disappointed because the markets have been frozen—literally.  The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for February 15, 2015 was flat, registering a meager $4 drop (or less than 1/10 of one percent).  It appears our old friend uncertainty has entered back into the market, bringing his buddies Old Man Winter and a chaotic world economy.  The way many of the commodity markets look at this time, Mr. Deflation may be just around the corner.

Most in the industry hope the markets are frozen by bad weather, but regional executives are telling me that business is flat-to-down across the country, including areas with good weather.  If the markets do not begin showing some heat by mid-March, the optimistic housing forecast may have to be doused with the cold reality of an underperforming market.

Little changed last month in the market, with some items moving in different directions.  Below are some of the notable changes in this month’s Index.

  1. Rebar dropped 7.2% while wire mesh added 1.9%.  Poly sheathing gave back 2.8%.
  2. Spruce lumber dropped 3.8%-7.5% while pine dropped 2.0%-6.2% with narrow width falling farther.
  3. CDX pine edged up a couple of tenths while OSB added 5.7%.
  4. Trusses declined 1.8% on lower lumber pricing.
  5. Insulation was up 13.6% on new yearly pricing.
  6. Many metal connectors were up on increased pricing for the year.

Concern about the port issues out west is growing, and there is a fear it will spread to the east coast ports, especially those in Florida.  If the issue is not resolved in the next few weeks, certain imported items could have limited shortages and longer lead times.  Consider the items you buy, which have Asian roots, and plan accordingly.

The next 30 days will probably be the best predictor to the upcoming year.  If the market remains sluggish with flat-to-down commodity prices, expect sales to sputter.  If prices and activity crank up with warmer weather, expect a much better performance than last year. 

Now is not the time to do long-term quotes, because prices could be way up in the next 30 days.  Protect yourself with a price escalation clause.  If you don’t have one, you can utilize one we developed in conjunction with this Index.  Contact Rebecca Ballash at  This email address is being protected from spambots. You need JavaScript enabled to view it.  for a copy of the clause. 

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. .

Whole House Commodity Index 01/16/15

gph Jan15whi

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index), for the first week of January 2015, increased 0.2 percent to $30,370.42 primarily on the annual increase in drywall and another sizable increase in concrete pricing. Overall, the sentiment remains lethargic as winter weather up north, increasing economic headwinds, and an uncertain housing forecast have made many builders weary of increasing housing inventories. Plus, commodities across the world are being pushed downward, as demand globally appears to be feeble at best.

The interesting part in the first quarter will be if price increases materialize as many manufacturers announced and want, while builders rethink building decisions. There appears there is little impetus at this time for a rising lumber market, but some are holding onto the hope that historically low interest rates just might push some buyers off the sidelines. My concern is if interest rates in the mid four percent range couldn’t get buyers in the market, I’m not sure one point lower will make much of a difference. Money is still cheap. The problem remains that ordinary people cannot get credit or they are unable to navigate through the maze of the home lending process.

Typically, I note at this time the major price movers for the past 30 days. This month I am going to first point out the major price movers for the past year. For many builders, they may want to consider these increases when calculating their new pricing for 2015.

  • Foundation mesh dropped 6.3% with rebar giving up 7.3%. Foundation poly gave up 6.1%.
  • 3000# concrete increased 18.9% with regular blocks jumping 17.6% and chair blocks up 12.3%.
  • 80# mortar mix increased 12.3% with sanding adding 10.8%.
  • CDX pine plywood jumped 19.7% while OSB sheathing dropped 5.4%. At some point the differential between the two will push more builders to OSB sheathing, which has more available manufacturing.
  • Dimensional spruce is flat having dropped 4.7% with spruce studs adding 8.3%.
  • Wide width 2x12 pine is down 12.1% while 2x6 pine jumped 9.5% and 2x4 pine dropped 8.6%. Prices moved by individual size; not so much by species.
  • Trusses were up 6.3% on higher labor and metal costs.
  • Treated posts were up 19.1% on higher wood and treating costs.
  • Insulation was down about 4.0% and roofing in general was down about 6.0%.
  • Drywall is actually flat from last year as most of the increases did not stick by year- end.
  • Windows and doors averaged price increases from 3.0% to 4.5%.
  • Garage doors added 3.0%.
  • Concrete siding dropped about 4.0% on increased competition.

The major price movers since December 2014 (last month):

  • Wire mesh was up 7.3% on much higher import costs.
  • Concrete was up 4.5% while blocks increased 5.4%-7.5%.
  • Lumber was flat in most cases with studs up 2.6% and wide 2x12 pine up 8.4%.
  • Roofing was down 5.7-7.0% on slower sales.
  • Yearly drywall increases began in January, adding about $20 per thousand across the board — that’s about a $1 increase per 4x12 board.
  • Casing and base dropped by double digits on increased availability.

Concrete related products have been the one building material component that announced price increases that stuck. Drywall and roofing prices eroded as demand declined. Lumber pricing is all over the board and it appears it truly depends on what size and length sitting on the wood deck determines the wholesale price.

One concerning product is CDX pine plywood. Back in the day, plywood was always higher than OSB sheathing but it followed that market; not any more. Because OSB sheathing production is so plentiful and CDX pine plywood manufacturers are dealing with fewer available mills, prices have gone in opposite directions. I do think if the trend continues, the price will force some builders to rethink their CDX plywood use paradigm and switch to OSB.

I hope you find this month’s Whole House Commodity Report insightful in comparison to last year. I personally was surprised by some of the yearly price movers.
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. .

Whole House Commodity Index 12/15/14

WHCI 15dec14 Graph

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) continued to trend in a very narrow pricing range throughout early December, as it dropped 0.2 percent to $30,314.  Spotty demand fueled by early winter weather, coupled with declining fuel prices, left mills and manufacturers searching for business.  The Index has priced out in a narrow range since spring, despite some volatility in the market, resulting in movers and decliners offsetting one another.

Confidence in steady growth and uncertainty in housing demand still remain huge components in the market.  The huge decline in oil prices seems to be ushering a deflationary tone into the commodity market, which may tap down prices through the first quarter of 2015.  Unless there are significant changes in housing lending policies, there seems to be no magic bullet for housing starts in January—just more of the same.

The decline in the Index was prompted by decreases in wood commodity prices.  CDX Pine plywood dropped 6.2 percent this month while OSB sheathing gave back 7.7 percent.  Pine dimensional was flat-to-down 4.3 percent, depending on size, while single-digit drops in spruce studs were offset by single-digit increases in spruce dimensional. 4x4 treated posts added 4.8 percent, as manufacturers searched for yellow pine stock for spring production.

Foundation metal products was the only group to move in unison with rebar adding 1.0 percent while foundation mesh surged 4.1 percent. The only other significant mover was a 6.0 percent increase in house wrap, which has been on a continuous sale for the last two years. While drywall and other building material sectors, such as insulation board, doors, and windows are indicating increases after the first of the year, the ability to make new higher prices stick could be in question. 

Here are my concerns with the market and next year.  I am concerned about the deflation in oil prices and the overall effect it has on commodity wood pricing.  If there is no significant increase in demand, and mills have lower fuel costs, expect heavy discounting.  While that is good for builders in the short-term, it is bad for a shaky supply channel in the long-term. 

I am concerned 2015 will have a slow start, keeping the year from reaching expectations.  While activity is okay in the Central Florida marketplace, it is not as brisk as it should be if 2015 is going to live up to its top billing as a breakout year.  Professionals in real estate as well as lending and banking seem to have the same take on business—it is better than the depths of the Great Recession, and it has improved, but it is far from a good normal. 

If 2015 is going to start off strong, lending institutions should be flooded with new mortgage applications; instead, most lenders are saying the number of new applications is just steady.  It is hard to imagine steady producing a significantly improved number in the first quarter.

For the next 30 days, there will be little momentum in the marketplace to increase prices.  Builders should re-bid projects that were bid months ago, as commodity prices have settled.  When bidding future projects, builders should be mindful of today’s prices, which may be too low if spring building were to crank up. 

I wish everyone a Merry Christmas and Happy 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. .

Whole House Commodity Index 11/17/14

wh graph 17nov14 web

 

Last month, the housing market was looking for traction.  Based on recent pricing, it didn’t find it. The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for November increased 0.1% with declining prices pacing a 4-to-1 advantage over advancing prices.  The early wintry weather in the northern areas is not what the housing market needed, and there is a growing expectation that the year could end very spotty.  This does not bode well for commodity prices, which includes declining fuel prices.

For the last six months, the Index stayed within a less-than-one-percent range.  While the stability in pricing is welcomed by many builders, it probably underlines a malaise in housing demand.  Most believe if demand had firmed, as originally forecast for 2014, then commodity pricing would be much stronger due to supply chain and manufacturing issues. 

Recent 2015 housing forecasts by the National Home Builders Association and Moody’s predict huge gains next year; however, many in the industry are jaded because these same forecasts over the last five years have not materialized.  Consider the forecast for 2014 predicted 23 percent growth in housing, and some believe the actual number will come in well below 8 percent.  Another bad winter and slow start to 2015 will only fuel this skepticism.

  • The following were the notable price movers in the Index from October to November:
  • Masonry sand increased double digits on new freight rates and higher costs.
  • CDX pine plywood increased 1.2% while OSB jumped 10.8%
  •  2x4 yellow pine dropped 3.8% along with 2x12 at 1.1%.  2x6 pine increased 5.5% on specific tally demand.
  • Spruce studs dropped 2.5% while most dimensional spruce moved downward by 3.5%
  •  4x4 treated posts declined 5.4%
  •  Insulation declined 1.0%-6.5% on winter buys.
  • Market pricing and special buys pushed drywall pricing down 0.5% to 4.5%.
  • Window manufacturers added 2.0-3.0% on window pricing.

As the weather has gotten colder over the last few weeks pricing has dropped.  Expect that trend to continue.  Most dealers and distributors are buying “hand to mouth” because most believe the market has little momentum to go up.  There is some peril given the current state of trucking and longer lead times.

For the most part, builders should expect a flat-to-down trend in pricing to the end of year when annual price increases for such items as insulation board, drywall, doors and other building products will take hold.  Whether these annual price increases can take hold will depend more on weather and demand than actual increased costs.

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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