Whole House Commodity Index 03-17-2014

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) increased 1.7% to $29,994.89, primarily on the increase in masonry supplies and sheathings. Prices are up 1.7% since January, and up 2.5% since last year. Interestingly, the March 2014 Index is one-tenth of one percent lower than April 2013, which was the second highest number in the history of the Index. If warmer spring weather boosts sales or there is significant inflation due to fuel costs, expect the Index to hit record highs.

Here are the Index’s notable movers for March:

1. Wire foundation mesh was down 5.3% on imports’ overwhelming supply.
2. 3000# concrete increased 8.6% while block added 6.6% to 9.4% as manufacturers struggled to cover costs.
3. Sheathing costs were up significantly. CDX pine soared 19.5% and OSB sheathing jumped 7.2%. It seems manufacturers have managed supply to current demand.
4. Wide width pine lumber was up 9.0% while narrow widths were mixed in the lower single digits.
5. Spruce dimensional was basically flat trading in the positive single digit range.
6. Vinyl siding soffit added 3.3% while PVC cellular boards gave back 4.1% on increased competition.
7. Moulding prices were mixed as some wholesalers offered deals.

Shingle manufactures have announced increases in April from 3%-5%, which might stick if fuel prices continue to rise and the wicked weather continues. The next 30-45 days will probably dictate the trends for the year.

The weather is improving and this will be the point in which housing will either take off or meander in the doldrums. For the first couple of months of 2014, weather has been blamed for the lackluster numbers; this may be the point in which experts have to quit blaming the weather and start blaming the economy and the new regulatory environment.

If construction steps up over the next month, or so, expect prices to jump dramatically; however, my cracked crystal ball is predicting a very narrow range of price deviations in the short-term. Still, builders should protect themselves with an escalation clause in their contract, because historically bad winters usually result in heavy price runs in the spring.

Watch fuel prices because they are rising. In Central Florida, there have been some spotty gas shortages. This could raise prices in building material items that rely heavily on fuel for production or logistics.

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 02-17-2014

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) remained relatively flat at $29,491.06, as increased freight rates and price increases in non-commodity building products offset modest declines in commodity pricing. The grip of a harsh winter has subdued short-term demand but not long-term enthusiasm. Many in the construction industry believe 2014 will be a strong year; however, total housing permit numbers released in January for the month of December were down 3% and 4.8% in single family. 

There is a belief by many that the harsh winter weather has depressed permits and housing starts in January. This could be true, but if this weak trend continues at what point do you stop blaming the weather?

Here are the Index’s notable movers for February:

1. Rebar was down 4% from over supply due to imports.
2. CDX pine plywood gave up 8.8% while OSB dropped 3.3% due to bad weather.
3. Pine lumber had wide with pine dropping 3.0% with narrow width 2x6 going up 12.2%.
4. Trusses jumped 1.6% on higher freight, material, and labor costs.
5. Moulding jumped 6.7% on increased pricing.
6. Door prices were up almost 3% on pre-announced increases.

Increased pricing concerns appear to be growing over the next few months. The labor dispute settled between the Canadian National Railway Company and the Teamsters has many wholesalers predicting a 3-5% increase in freight rates later this spring. Rumors of huge, foreign block buys of spruce are floating as if to sway buyers off the fence. Plus, letters and notices have been sent out for some very hefty increases in concrete.

It appears the will of the market and its players is moving higher, but the reality of housing starts could get in the way. The one thing that will really determine if this market goes on a pricing tear is demand. Simply put, if the weather improves in the next couple of weeks and demand heats up expect pricing to quickly move upward.

Builders should be very cautious in bidding projects at today’s prices for start time in March or April. There is a good chance the cost of business is going up. Be sure to put a price protection clause in your contracts.

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. To sign-up for the Index and other free market reports go to www.romaclumber.com. 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 01-15-2014

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Surprisingly, the Ro-Mac Lumber Whole House Commodity Index (Index) for January 2014 increased 1.1% to $29,495.71, despite real winter conditions having most of the control.  This indicates that mills and manufacturers are in firm control of the supply portion of the equation.  It also does not bode well for moderate spring pricing with pricing arching up in spite of stagnant demand driven by record cold. 

To put this in perspective, the following are some interesting comparisons: 

  • Since last January, the Index is 3.4% higher; however, last year the devastation caused by Hurricane Sandy coupled with a milder winter pumped up demand.
  • In April 2013, the Index reached its record high of $30,023.04, and while January’s amount is 1.8% lower, it stands as the second highest price since the Index began in April 2005.
  • In October 2010 following the Great Recession, the Index appeared to have bottomed out at $23,834.79.  Since that point despite a few gyrations the trend has been upward.  Over the last 39 months the Index has increased 23.7%. 

These numbers do not indicate that prices will decrease in 2014.  If anything, if housing starts top one million for the year, pricing could increase double digits due to struggling supplies.  

While the high price scenario is easy to predict there are still real systemic problems with housing, from the new mortgage rules to the problems with flood insurance.  Not to mention the lack of capital availability for small companies.  The next couple of months should go a long way in predicting the year. 

Here are some of the notable price movers for January: 

  1. Rebar foundation rods were up 4.2% due to issues with foreign imports.
  2. A general increase in sheathing prices resulted in a 4.2% increase in CDX pine while OSB sheathing increased 7.3% in price.
  3. Felt prices went upward 3.8% on increased manufacturing and delivery costs.
  4. 2x4 spruce jumped 3.8% while 2x6 spruce jumped even higher at 4.8%.
  5. Pine 2x6 dimensional lumber was up 12.2% while wider width pine hovered around a 5.0% increase.
  6. Trusses increased 2.3% on higher lumber and plate costs, which are mainly attributed to trucking.
  7. Drywall prices soared on industry wide increases of about $30 per thousand, or 13.6% on regular board.
  8. Announced window price increases were around 2.0% for standard items, and up to 5.0%-7.0-% for specialty windows.
  9. A 5.0% plus decrease in shingles were sold as special winter buys.
  10. Vinyl siding prices dropped by double digits with special winter buys. 

There was a lot of movement in many areas, which netted out an increase. 

If the forecast starts come to fruition and the country experiences nasty spring storms, builders should be wary of price increases.  Jobs being bid for later in the spring and summer should include a price escalation clause, as pricing could elevate very quickly.  Smart and cautious bidding now could save a builder thousands of dollars in losses later.

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 12-16-2013

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The Ro-Mac Lumber Whole House Commodity Index for December dropped .4% as an early start to winter cooled sales down across the country.  As one veteran observer pointed out, it appears the northern United States will have a real winter this year.  Only four items on the index increased compared to nine items which decreased.  The vast majority of the items remained flat in pricing.  Nothing real impressive either way.

Here are the few notable price changes. 

  1. Wider width pine dimensional lumber was up 3.1%-5.1% while narrower 2x4 pine settled 4.5% lower.
  2. Dimension spruce was down on average 9.1% with studs down a little less than 5%.
  3. In sheathing products, OSB was down 3.1% while CDX pine remained basically flat only giving back .4%.
  4. Rebar was up less than 1%.

 As you can see there is not much happening.

 Now it is time for the big question. 

As we have warned for the last several months, countless companies and segments of the markets have announced significant increases after January 1st.  If most of the United States is in the midst of a real winter and demand is slow to build, which companies and segments of the market are willing to push announced price increases?

Plus, new mortgage rules via Washington D.C. could damper housing demand next year.  This is above the typical government dysfunction of budget battles, health insurance, and over regulations which have been impeding new housing growth this year. 

Probably the most interesting comments I’ve heard lately is how business improvement is more confined just to the larger areas.  Many vendors have pointed out that in rural areas of the South, the economy is still very bad and those areas continue to suffer badly economically.  There is a softness permeating the market and while the winter weather may be blamed, it is still debatable.

Keep one thing in mind about the permit numbers in Florida and other areas.  Many local governments are re-instituting impact fees or increasing building permit fees in January, plus the new mortgage rules also start in January.  Year-end permits numbers could be distorted leading to a false optimism, this tempers my optimism a little for 2014.

Over the next 30 days manufacturers and mills will try to firm and increase pricing, but I am not sure the market or weather will cooperate.  Keep a close eye on the market and bid projects with increases in mind, but with the hope of a pleasant surprise when the purchase orders are actually cut.

Finally, Have a Merry Christmas and joyous, prosperous New Year.  May God Bless you, your family, and business.

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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