April 2019 Whole House Commodity Index

April 2019 Whole House Graph

WHOLE HOUSE COMMODITY INDEX – April 2019

by Don Magruder, CEO of RoMac Building Supply

In last month’s RoMac Building Supply, Inc. Whole House Commodity Index (Index) I wrote the following regarding the pricing and market prospects for the ensuing 30 days, “If these wood commodity markets continue to retreat the next 30 days, I am concerned this will be a bad harbinger of the housing market for 2019.” My concern levels are increasing as housing demand continues to look for a clear upward direction and pricing continues to lag far behind expectations.

Over the last 30 days, the Index has declined 1.3 percent to $33,428 as commodities brokers and other building material manufacturers search harder for buyers. The frenetic sales pace from April 2018 is gone and some producers have yet to come to grips with the new reality. After a nice increase in February the Index went flat in March and declined in April, which makes me wonder if the spring run-up in pricing is finished before it got started. The solid $5 per thousand declines in last week’s commodity markets does not instill confidence that sales are poised to increase.

Below are the notable price movers on the Index for the month:

  • Rebar accessories added 5.0 percent to 18.2 percent as higher imports make their way. For contractors using wire foundation mesh, the price has declined about 5.0 percent over the last month.
  • In sheathings, 19/32” CDX pine plywood dropped 3.1 percent while OSB sheathing gave back 1.7 percent.
  • Spruce studs dropped 1.7 percent while 2×4 dimensional spruce retreated 9.0 percent and 2×6 spruce quoted down 6.6 percent. Despite a split decision from the WTO on the American and Canadian Softwood Trade Dispute, which could have reversed pricing declines, some experts question if the pricing adjustments in spruce are already built into the markets.
  • 2×4 #2 pine added 4.3 percent and 2×6 pine was unimpressive with a 0.8 percent retreat. The big mover was 2×12 pine, which dropped 11.8 percent. Log availability is better now that the weather is warmer and dryer.
  • Roof trusses dropped by almost 1.0 percent on lower lumber costs.
  • A sprinkling of fasteners and metal connectors increased plus 5.0 percent as vendors are dealing with higher tariffs from Washington, D.C.
  • Spring insulation price increases added nearly 10.0 percent onto R15 wall insulation.
  • Base wood moulding gave back 10.0 percent as wholesale suppliers react to more competition.
  • Drywall prices decreased as suppliers began to give back their price increases from early 2019.

Although most of the downward pressure came from the wood commodity markets, there are signs where this need for orders is spreading to all construction supply sectors. Unless there is a huge, quick increase in housing starts, I expect the Index to remain flat-to-down over the next few months. With each day, the commodity markets, suppliers and builders are growing concerned as this year’s housing market continues to falter.

The RoMac Building Supply 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 RoMac Building Supply in Central Florida. Go to romacfl.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.