Whole House Commodity Index 07/15/15

wh graph 15jul15

Whole House Commodity Index - July 2015

By Don Magruder

 

Since last month, the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) increased 0.6 percent to $30,136.85, but in actuality if not for the new Florida Building Code the Index would have dropped 0.8 percent. Wow! That sounds like double-talk from a twice-convicted politician.

The Florida Building Code updated on July 1, 2015, and insulated aluminum windows in the Index had to be upgraded to vinyl windows to meet the new energy standard. The windows went up 19.2 percent and the new vinyl patio door is 31.2 percent more. Builders, make note that any of your projects that have not been permitted before July 1, 2015, will face the new window standard.

For the most part, pricing remained stable-to-down with a mixed bag on certain commodities. There continues to be very little impetus for a rising market, and it is almost like most items are in a holding pattern. Commodities worldwide are struggling to find a foothold and hold pricing, so I see little change in the near-term without a significant event either weather or demand driven.

The following are the notable movers in this month’s Index:

1. CDX pine is down 6.7 percent while OSB sheathing also drifted lower by 4.0 percent.
2. Narrow width pine is down 1.3 percent with wide width 2x12 up 6.7 percent.
3. Trusses dropped 2.8 percent on lower pine numbers.
4. Spruce studs were slightly up with dimensional spruce adding 2.3-3.4 percent depending on width.
5. As mentioned earlier, the increase in window pricing (due to changes in the Florida Building Code) are 19.2 percent on windows and 31.2 percent on patio doors.

I have two concerns this month. First, I am not sure there is enough available vinyl window production in the short-term to keep up with demand. I fully expect much longer lead times, higher prices, and service nightmares. Builders should order windows early and, most importantly, thoroughly verify their orders, because there will probably be very few quick ships for orders that are placed wrong.

My second concern is the direction of commodities in general. The worldwide economy is not good, and this turndown in commodities ultimately could draw down supply. Builders should understand that a rising commodity price is your best indicator of a thriving housing market. My suggestion is simple—this time of year stay on top of your supply chain. A Hurricane Andrew event anywhere in the United States could change market pricing quickly, as the supply chain is very thin right now. This is also not a good time to order products at the last minute. Good planning could be a big advantage to builders in the next 30-60 days.

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 06/15/15

wh graph June-2015 Web

Whole House Commodity Index - June 2015

By Don Magruder

 

Lumber markets surged higher over the last 30 days, which helped boost the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) 0.1% to $29,967.65. Overall, the Index was subdued by declines in trusses, rebar, and narrow width pine lumber. While housing starts surged 20% to an annual rate of 1.1 million, most housing experts are not ready to declare that the housing market is fixed. Over the last several years, there have been many false positive signs that housing was rebounding, and most in the industry want to see multiple months of consistent growth.

The following are some of the particular movers in the Index since last month:
1. Foundation wire mesh increased 5.4% while rebar dropped 8.3% on heavy imports.
2. CDX pine plywood remained flat with a 0.5% increase while OSB sheathing added 4.7%.
3. Trusses dropped 3.0% on declines in narrow width 2x4 pine.
4. Spruce studs increased 8.5% while 2x4-16 spruce added 8.0% and 2x6-16 spruce added 11.3%. Spruce prices have declined so much over the last few months, this move is almost considered a “get back.”
5. Pine dimensional lumber had 2x6 up 4.0% while 2x6 edged up 11.3%.
6. 4x4-8 treated posts declined 3.9%.

New building code changes, which go into effect at the end of June, will increase the cost of building in Florida. This is exactly what homebuilding does not need. The construction industry is dying from a thousand cuts—with changes in building codes, tweaks in mortgage approvals, and new local impact fees. Just this weekend, a mortgage broker from a major bank told me that it is still very difficult for ordinary people to get lending. As long as this persists, expect housing to miss expectations.

Where does the market go from here? Few people have confidence these price increases from last month will stick. The little carry-over in the pine plywood market is not a good sign, and the collapse of rebar prices suggests demand is limited. May’s housing blip could be pent-up demand from winter. It will take several months of housing numbers to determine whether these increases in lumber were the indicators of a blip or trend.

The other big news is that the price increase in roofing got battered when GAF decided not to implement a price increase on shingles. The company also announced plans to shelve a manufacturing facility in Moberly, Missouri. Plus, consolidation among the huge national contractor suppliers is an indication that companies will be consolidating and closing more locations.

The parameters of housing indicate rough economic conditions will continue for the foreseeable future. Builders should price projects close and keep all bids current in order to avoid getting caught in the volatility of the pricing storm.

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 04/15/15

wh APR-15 WEB

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. .

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