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. .

Whole House Commodity Index 10-14-14

14oct14 WHCIndex

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for October 2014 is just like the housing market—it’s looking for traction.  Manufacturers and mills believe they are in control of pricing one month, and the next month they are begging for orders.  Although the general trend has improved, uncertainty remains a constant factor in housing. 

Without a clear and sustained upward movement in housing, we should continue to expect volatility. The Index rose 0.4% to $30,350.60.  This marks the sixth straight data point in which the Index priced out in a very narrow range.  The message is clear—housing is still facing headwinds.

The following were the notable price movers in the Index from September to October:

  • Rebar was down 5.1% as imports outweighed demand. The CDX pine plywood mills remained firmly in charge with a 6.3% price increase.
  • Felt dropped 7.3% on lackluster demand in roofing.
  •  Dimensional yellow pine lumber dropped 9.3% to 12.2% as mills ran out of buyers.
  • Spruce dimensional lumber resisted huge slides as mills stayed firm on quotes.  In the last 30 days, spruce studs were almost on par with a half-point drop while dimensional narrow widths dropped 2.5% to 3.1%.
  • Shingle manufacturers implemented a 4.5% increase on shingles; however, it appears there is little sticking power on these increases as demand continues to be spotty.
  • Drywall pricing dropped 3.0% to 4.2% as manufacturers searched for business.
  • Frankly, there’s just not enough sustainable indicators to move the markets in either direction.  With winter closing in quickly, expect pricing to soften.
  • In volatile markets, the end user with hard-timed planned projects is hurt the most.  Without much warning, prices could escalate quickly.  Therefore, builders should be careful using the lowest number to bid projects.  Having a little pad doesn’t hurt, just in case a mill decides to shut down for winter maintenance.

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 agt This email address is being protected from spambots. You need JavaScript enabled to view it. .  

Whole House Commodity Index 09-16-14

wh SEP14graph Rwebsite

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for September 2014 remained par with August, as price gains were offset by price decreases in other areas.  America’s housing market is in purgatory between boom and bust with builders uncertain if next year will be heaven or hell. 

Most analysts believe the gain in housing starts, in July, was a result of the normal adjustment from unexpected lower starts, earlier in the year, and they do not expect an upward trend. The problem continues to be, ordinary people are finding it very difficult to qualify for a home loan.  In addition, the cash and investment buyers, who propelled the markets over the last couple of years, may be running out of steam.

The Index increased a dismal $8 to $30,219, netting out a zero percent difference from August to September.  The following were the price movers within the Index:

  1. Sheathing dropped 5.4% as both CDX and OSB mirrored their declines.  
  2. Narrow width 2x4 pine increased 4.1% while 2x6 pine added 8.8%.  Wide width 2x12 pine dropped 2.9%.
  3. Spruce dimensional was up 2.6% - 3.2% while studs added 3.0%.
  4. Rebar mesh dropped 4.0% while other foundation materials remained steady.
  5. Trusses added 1.0% on increased 2x4 pricing.
  6. Doors added 1.0%, plus an increase in moulding costs.

The declines in plywood were precipitated by the market settling down after a plywood mill fire in Springfield, Oregon back in August.  It took a few weeks for the mill to determine that production could keep up with demand.  Mills are looking for anything that can create an upward move in pricing.

The Index dropped 3.2% since last September, and the impetus going forward does not appear to be upward.  Last fall, the Index remained flat despite a strong year-end.  This year, without an unexpected pop in business, builders should expect pricing to remain flat or moderate.  The next few months will be a good time to build.

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 08-18-2014

web2 GRAPH whcIndex AUG 14

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for August took a dip on the rollercoaster ride, as it dropped 0.7% to $30,211.46. Weakness in the housing market set the tone as new homes sales continue to be unimpressive, with most areas behind new homes sales in 2013. Recent reports from Freddie Mac, and field reports from representatives in manufacturing, suggest some metro markets have seen an improvement in the housing market; however, once you step outside those specific markets housing is down as much as 30%. One representative said, “Not only is business not getting better in rural areas; it’s getting worse.”

The markets are searching for any impetus to move forward and find solid ground. Instead, they seem to be reacting to special events, like the Swanson Mill fire in Springfield, Oregon (on July 17, 2014, the mill was completely destroyed by fire), a major supplier of fir plywood and veneer out west.

You wouldn’t think it would have that much of an effect on pricing in Florida; but it has. Because so many mills have closed during the Great Recession, CDX pine plywood is now being shipped out west. The price of 5/8 CDX rose 7.3% (or $1.28 per sheet). Its sister component, OSB sheathing, dropped 5.1% due to spotty demand. The American building supply chain has gotten so fragile that a mill fire in Oregon can drive up pricing in Florida by 7.3%.

Over the last two years, the price increase train has been in roofing and drywall products. However, over the last month, special pricing deals have emerged because manufacturers are concerned about keeping plants functioning. Roofing deals just before hurricane season are rare, but this year manufacturers are looking for business.

What does that really say about the market? Suppliers, mills, and manufacturers grow increasingly concerned about the stability of the housing market. It is becoming quite clear that the “rose-colored glasses” forecast, of just six months ago, is not happening.

Here are the price movers from mid-July to mid-August.

  • Foundation wire mesh was down 0.3% while rebar increased 1.4%. Manufacturers are trying everything to lift their market.
  • CDX pine is up 7.3% due to a mill fire while OSB sheathing dropped 5.1% due to demand.
  • Tighter supply and increased exports pushed up dimensional lumber. Spruce was up about 1%; pine narrow widths increased 12.4%; and 2x6 incurred a 17.5% increase, while 2x12 pine gave back almost 4%.
  • Studs sprinted down almost 4%.
  • On average, drywall pricing adjusted 4% as mills searched for orders.
  • Special buys on casing eased prices down 6%.

Pine plywood and dimensional lumber prevented the Index from dropping much more. The strength of these price increases could be temporary, once emotion leaves the marketplace.

One important factor to keep in mind is that the country is in the midst of hurricane season. If one mill fire out west could drive the market up this much in one month, imagine the effect a strike or a serious hurricane threat could have. For the next couple of months, builders should protect themselves on long-term quotes, as the threat of a sudden spike in markets exists primarily, as a result of a supply chain that cannot seem to abide any bumps in the road.

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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