Whole House Commodity Index 04/15/15

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Housing supply indicators in mid-April 2015 still do not point to a vastly improving housing market; if anything, they are indicating the opposite.  Since March, the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index dropped 0.4 percent.  The decline would have been further if not for some healthy quarterly adjustments in freight costs.  Weather reports can no longer be used in explaining underperforming markets, and I simply do not buy the notion that a shortage of inventory is creating lackluster numbers.  What I have seen after having been in this business for 35 years—if demand were that strong, everyone in the supply chain would be feeling the pressure, as builders quickly slapped up houses on vacant lots.

 

In my view, the same problem continues to hamper the recovery in the housing industry.  Ordinary people cannot get access to capital, and those who may qualify do not have the patience or will to navigate the 800 pages of government red tape and roadblocks.  Government regulations have made it too difficult for many buyers to get through the home buying process.

 

Here are the notes from last month’s market movers:

  • Most lumber and plywood decreases were offset somewhat by the annual adjustments in new freight costs.  As a rule, the market was down across the board.
  • CDX pine plywood finally began to drop on leaner demand by 5.6 percent, while OSB sheathing followed suit by dropping down 3.8 percent.
  • Truss prices declined 3.8 percent on lower lumber costs.
  • Insulation prices dropped around 8.0 percent on special buys.
  • Interior prices increased on average 5.0 percent on increases in door slab pricing.

 

Concern by builders, manufacturers, and suppliers about the real health of the housing industry is mounting.  Those home builders and suppliers in the oil patch are starting to grow uneasy, as low oil prices are shutting down production and jobs.  Today, I received a forecast from experts in the drywall industry.  They expect to see their products deflate in price throughout the year.  It also appears that shingle manufacturers are really struggling to hold onto their pricing. 

 

While many see declines in pricing as a good thing, in most cases it is the best indicator of the real demand in housing.  With spring well underway, the selling season is not looking as good as promised.  Hopefully, this spring will be a late bloomer.

 

 

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 03/16/15

graph WH 16mar15

 

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) remained basically frozen last month with a mere tenth-of-one-percent decline to $30,349.  The Index has remained in this very narrow range since October 2014, with advancers being offset by decliners each month.  It has been almost a year since the Index made any real increase or decrease.  While that sounds great, the problem is that these numbers indicate a lackluster housing market.

Consider that the National Association of Home Builders - Builder Confidence Report dropped two points this month.  In addition, Black Knight Financial Services is reporting an 11 percent repeat foreclosures in January.  Housing starts dipped two percent in January and the lumber commodity markets are in a decline.  In fact, many analysts consider the lumber commodity markets as the biggest indicator of the future direction of the housing market. 

The weather has been blamed for a lot of the dismal news in regards to housing.  While the winter season has been tougher in some areas, doesn’t it usually get cold and snowy up north during wintertime?  Plus, the weather has been great in the three biggest states in the union—California, Texas, and Florida.  These three states are the biggest drivers in the country. 

The real concern should be focused on the oil patch areas and the harsh economic headwinds that come from collapsing oil prices.  If prices remain low and production is dramatically reduced, this will have a major negative effect on the nation’s housing market. 

Here are the few movers from this month’s Index:

  • Rebar added 2.2% while wire mesh retreated 5.5%.
  • Felt dropped 2.0% on winter buys.
  • Pine CDX plywood added 1.0% while OSB sheathing dropped 12.8%.
  • Dimensional spruce gave back 6.4%-8.5%, depending on size and length.  Those markets are searching for buyers.
  • Narrow pine gave back as much as 5.3% while wide-width pine eked out a 1.9% increase.
  • 4x4 treated posts added 6.5% on spring buys.
  • Engineered beams added 3.1% on higher costs.
  • Door pricing was up on average 5% on annual increases by manufacturers.
  • Garage Doors added 3.1% on new yearly pricing.
  • Cement siding added 5.4% on a push for higher pricing.
  • Annual increases by doors essentially wiped out the declines in commodities.  Most of the increases in other building lines have taken place for the year.  Next month, without an increase in housing activity, the Index will probably decline.

Let’s face it—we all need housing to meet the expectations most of the experts had for this year.  I don’t buy some of the arguments as to why builders are not building.  I think the main problem remains—ordinary people cannot obtain financing—it’s too tight and requires jumping through too many hoops to secure. 

The next two weeks will probably be the best indicator of the housing market for the next three months.  If prices continue to hold flat or decline, you will know the direction. 

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 02/16/15

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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

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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. .

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