Whole House Commodity Index 09-16-14

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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

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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. .

Whole House Commodity Index 07-15-2014

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The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for July is firmly strapped in the rollercoaster of uncertainty. The 0.4% drop in price in June was reversed in mid-July to a 0.7% increase to $30,423.25, which is a record high. Over the last three months, pricing has bounced in a narrow range; however, strength in plywood and spruce products fueled the latest incline in the pricing rollercoaster.

Most dealers and builders are growing increasingly frustrated with the construction market’s lack of consistency, reminding many of a misfiring motor. While pockets throughout the country and state are performing well, others are down. There seems to be a continuous change of who is up and who is down.


For most, the root cause of this uncertainty lies in Washington, D.C. An incoherent housing policy coupled with a daily crisis or scandal has left many potential buyers on the sidelines. Furthermore, the biggest challenge to a full-fledged housing recovery continues--ordinary people cannot get credit.


Unless there is a hurricane, a national emergency, or an epiphany by the folks in Washington, D.C. to work together and crank-up the economy, we can expect the rollercoaster to continue. Builders should be aware these $20 ups and downs in commodities could cost them money. Bidding projects with a little pad along with a price escalation clause is probably a good idea, just in case we get a big hurricane this year.


Here are the notable price changes in this month’s Index:

  • Wire mesh dropped 4.2% while rebar eased off 1.7%. Too much steel is being imported.
  • Concrete is up 2.5% on a mid-year increase, and more may be on the way if the increase in bagged concrete is enforced. Concrete increases are meeting resistance.
  • 2x4 yellow pine gave back 4.8% while 2x12 pine declined 6.1% and 2x6 pine dropped 6.2%. Pine did not follow the spruce market’s increase.
  • Spruce dimensional 2x4 was up 12.5% while 2x6 spruce increased 16.7%. Heavier exports are fueling that market. Spruce studs added 6.1%.
  • CDX plywood increased 5.8% while OSB finally firmed up adding 3.6%.
  • Manufactured wood added 5.4% and 4x4 treated added 3.1%.
  • Trusses dropped 2.1% on lower pine numbers.

Whether an upward price momentum can build to sustain these increases remains to be seen. The pine market will most likely follow the increase in spruce as it tries to catch up to buyers.

Builders, be very mindful--the months of August and September are the worst months for hurricanes. One bad storm could change the market from being on a rollercoaster to a rocket; protect yourself.

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 06-16-2014

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I asked this question in May: “Has the building season finally started or does this month’s Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) represent a blip on the chart?”  The answer became clear over the last 30 days--it was a blip.  The housing industry in America remains on a roller coaster; with each rise and fall, uncertainty increases. 

The June 2014 Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) decreased 0.4% to $30,214.83, as dimensional lumber and sheathings gave back increases in May.  Other than a few minor price adjustments in some foundation materials, most building materials pricing remained flat. Future activity remains uncertain.

Mid-East turmoil coupled with rumors of war are sending oil prices higher.  This could force some companies to increase pricing despite spotty demand.  Trucking continues to be a problem for most manufacturers.  If demand were strong, trucking would be cited as a major reason for price increases.

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

 1.    Rolled foundation plastic dropped 8.7%.

 2.    Rebar added 1.0% on higher steel pricing while most foundation accessories retreated 5.0%.

 3.    2x4 pine was up 8.6%, causing a price increase of 3.4% in trusses.

 4.    Spruce studs were down 3.0% while dimensional spruce gave back 9.0%.

 5.    CDX pine plywood sheathing dropped 6.4% while OSB retreated 16.3% to mid-winter pricing.

 

Most manufacturers and mills are not in the position to weather a long-term market downturn without making significant cuts in operations or increasing prices.  If the current summer slog in the market continues, expect manufacturers to curtail production and possibly idle some facilities. 

Window manufacturers continue to struggle with production issues despite the lackluster demand, and this may be a microcosm of how bad the talent levels are in the industry.  With a sluggish economy most would believe good talent is abundantly available; however, it is not.  Like many, I am concerned when housing starts finally reach the normalcy of 1.2 million.

The biggest price increase on the horizon is in cement related products.  Most of the main producers in Florida have announced sizable increases for July, and it will be determined if they will stick.  Many continue having problems getting new mining approved and rising fuel prices will feed the need for increases.

Builders, the market remains terribly uncertain and world affairs could once again wreak havoc on demand.  Hurricane season is predicted to be less intense, but it only takes one.  Be cautious bidding projects during a down market, because what goes down will surely go up. 

Have a Happy Fourth of July and God Bless America!

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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