April 2018 Whole House Commodity Index

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by Don Magruder, CEO of RoMac Building Supply

The RoMac Lumber & Supply, Inc. Whole House Commodity Index (Index) for April 2018 was virtually flat since March.  However, there was plenty of movement within the Index indicating that the inflation run in commodities in building supplies is not over.  The Index in mid-April settled at $35,134, which is only 0.3 percent more than March.  This small increase marks the first time that pricing in the building material sector slowed down this year.  Although the flattening in pricing is blamed on a lingering winter in the Northeast and Midwest, the housing demand equation could be softening as pricing becomes unbearable for many prospective homebuyers.

A dive into the actual costs that make up the Index demonstrates the turmoil.  Here are the main movers in the Index over the last 30 days:

  • 20×100 rolled foundation poly retreated 11.6 percent on spring buys.
  • 5/8 grade 40 rebar added 16.1 percent on Trump steel tariff concerns.  Wire mesh dropped 1.8 percent on price resistance by the market.
  • >5/8” CDX pine plywood dropped 5.4 percent on weaker demand while OSB sheathing manufacturers were able to bolster pricing up 6.0 percent on managed supply.
  • Simpson hurricane ties were up 25.0 percent on Trump steel tariff concerns.
  • 2×4 spruce was flat to down 0.5 percent while 2×6 spruce dimensional lumber dropped 4.1 percent on softening demand.
  • 2×4-92 5/8 #2 spruce studs were flat trying to find a direction in the market.
  • 2×4 dimensional pine dropped 8.5 percent, 2×6 pine was flat, and 2×12 pine retreated 6.4 percent.
  • The decline in pine pricing offset the 15.0 percent increase in metal plates as truss pricing retreated a miniscule 0.3 percent.
  • Treated 4×4-8 posts increased 10.1 percent as the treaters entered the spring market.
  • Insulation board increased 6.7 percent as did rolled insulation, which added 3.7 percent.
  • Metal ridge vents were up 25.0 percent and aluminum drip edge was up 5.1 percent on Trump tariff concerns.
  • Garage Doors were up 4.2 percent on increased steel costs related to tariffs.  Garage door operators added 5.1 percent because of increased manufacturing costs.

What is spooky about this Index for the month is that core inflation, which typically does not fluctuate, as wood commodities increased within the Index.  Increases in steel foundation rebar, garage doors, insulation, and roofing metal were offset by declines in wood commodities that could be affected by weather.  It would not be out of the question to see a rebound in wood commodities over the short-term as spring and summer take hold.  This could expose a real pop in pricing.

Builders should be aware that a real base amount of inflation was built into the housing costs over the last 30 days, which will be exposed as wood commodities rebound.  This makes future pricing difficult.  Unless the market demand declines dramatically expect the Index to remain firm and retain most of the increases it has garnered since the first of the year.

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 rebecca.ballash@romaclumber.com.