APRIL 2022 WHOLE HOUSE COMMODITY INDEX

By Don Magruder

The RoMac Whole House Commodity Index (Index) for mid-April 2022 fell 10.8 percent to $58,794 which marks the first decline in 2022 and a full retreat to pricing at the start of the year.  While the decline is good news for builders and consumers, the markets remain very high in price and unstable in supply.  In last month’s report, I stressed how cloudy and uncertain the future of pricing had become, and this month, the clouds remain very dark. 

Here is why I take this view:

  • While this month saw significant declines in wood commodities, the wholesale pricing remains at very high levels.  Lumber, plywood, and OSB are a long way from being cheap. 
  • Inventories in the field are very low by many reports and much of the declines are from secondary wholesalers who were dumping extra inventory for cash.  The fact remains that overall capacity is not able to keep up with demand. 
  • Everyone in the industry is trying to figure out the impact of American and European economic sanctions on Russian timber, but that pipeline of lumber is cut and t in February, just before the war, supply was up 10 percent. 
  • The Ukraine-Russian War continues to cause an upheaval of supply chains in all metals which should start impacting the country more in May. 
  • Finally, nothing else is going down in price.  In fact, weekly, manufacturers throughout the building material sector are increasing price due to raw materials cost increases and trucking issues. 

Basically, in my opinion, the markets will remain at elevated levels for some time with volatility in wood commodities.  There will be continued significant increases and potential future disruptions for other building supply products as raw materials, labor, and trucking continue to present strong headwinds.  Low on the ground inventories and a dropping market can exacerbate volatility especially in an environment of challenged trucking. 

Below is a recap of the major movers on the Index over the last 30 days. 

  1. Rebar settled 3.3 percent lower as wholesalers tried to move inventories. 
  2. 19/32 CDX pine plywood dropped 29.0 percent and OSB plunged 45.5 percent, but oddly, CDX is not as plentiful as the market pricing decreases indicate.  Plus, even with these drops, pricing remains very high. 
  3. Yellow pine dimensional lumber adjusted down sharply. 2×4 was down 38.4 percent, 2×6 pine dropped 41.8 percent, but 2×12 pine price drops were not at dramatic at 16.6 percent as demand remains stronger due to the continued LVL shortage.
  4. Spruce dimensional lumber dropped in price, but not at the pine levels.  2×4 spruce dropped 21.0 percent while 2×6 spruce adjusted downward 12.9 percent.  2×4- 92 5/8” studs dropped 20.8 percent, but specialty lengths in studs remain stubbornly expensive and hard to find with elevated pricing. 
  5. Truss Pricing adjusted downward 20.8 percent on lower pine pricing. 
  6. 4×4-8 treated post dropped 2.7 percent while 2×4 borate treated pine lowered 36.5 percent. 
  7. The first signs of higher oil prices can be seen in roofing.  Shingle pricing was up 12.4 percent with synthetic felt pricing adding 12.8 percent. 
  8. Higher resin and oil pricing increased PVC trim boards 8.7 percent.
  9. Drip edge for roofing was up 6.9 percent on the first glimpse of increased volatility in aluminum.

Over the next month or so, manufacturers in drywall, windows, doors, and metal products are announcing increases.  No other areas are even suggesting lower pricing which screams that the demand equation remains strong. 

The uncertainty of the markets continues to grow.  A builder should be very slow to adjust pricing based on a 30-day trend or outlook.  In just a couple of months, we could be in an entirely different environment, and builders should protect themselves.

In blunt terms, the wood commodity markets have just knocked the stupid out of the markets, but stupid always has a way to come back- be wary.  

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. To sign up for the Whole House Commodity Index and other free market reports click the button below.