April 2016 Lumber & Commodity Report



by Don Magruder, CEO of RoMac Building Supply

The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index for April increased 10.9% to $315.50 as most items felt upward pressure. Over the last month, the first three weeks were the strongest for price increases, with some pricing cracks developing in the last week. The weakness of late could be an indication this market is running out of steam.

Another indication the wood commodity market is running out of steam is March’s Housing Report from the United States Census Bureau. In just released numbers, housing starts were down 8.8% when compared to February. Plus housing permit numbers (an indication of future activity) were down 7.7%. Single-family housing starts took the biggest hit by dropping to 764,000 units annually (or a decline of 9.2%). These numbers are stunning considering the 3.6% interest rate being offered on 30-year fixed mortgages and low unemployment at 5.0%. Housing appears to be stalled during the spring selling season.

Over the last month, the dimensional lumber portion of the Index was up 13.2% as wide-width 2×12 pine shot up a whopping 25.0% plus, with dimensional spruce adding on average 4.0%. 2×4 pine was up 9.3% and studs for the most part were flat to down.  Mills blame the huge increases in wide-widths on too much rain for logging. That should abate as warmer, dryer summer weather takes hold. Stud pricing holding back on increases may indicate a false strength in the market.

The sheathing portion of the Index was mixed as CDX pine was down 7.0%-10.0% while OSB sheathing added $26 per thousand (or on average 11% increase). Better demand in multi-family housing or a move to value could be fueling this market divergence. Whether these opposite directions will continue is debatable considering the OSB production available to the market.

The cracks that started to develop in the markets over the last 10 days could open up into gullies if these bad housing numbers persist. Price run-ups for the last few years have run out of steam in May and this is shaping up to be Déjà vu again. Builders should be mindful of the price increases—protect themselves, but stay close to the market.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (romacfl.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at don.magruder@romaclumber.com