August 2016 Whole House Commodity Index
WHOLE HOUSE COMMODITY INDEX – August 2016
by Don Magruder, CEO of RoMac Building Supply
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for August 2016 gyrated in place, with various fluctuations, which at the end left the Index flat. This could be a sign that the housing market is cooling as some sectors begin to use price to prompt orders. The next four to six weeks of hurricane season will probably determine whether these markets move or stay in place.
The Index finished at $31,264.06, which is almost $4 above the previous record high in July.
The notable movers in this month’s Index were:
- Wood mouldings retreated 4.2 percent on casing and 5.9 percent on base as supply outpaced demand.
- 1/2” drywall added 4.8 percent as manufacturers suspended special summer pricing and are waiting to see if weather can jolt demand.
- OSB sheathing added 3.0 percent while CDX pine plywood gave back a whopping 8.5 percent. These numbers do not bode well for overall demand.
- Dimensional spruce was up on average by less than 2.0 percent and, in many sizes, flat.
- Spruce studs added 2.2 percent.
- 2×4 and 2×12 pine added about 2.0 percent while buyers of 2×6 pine had to pay 8.8 percent more.
- Treated 4×4-8 posts were down 4.7 percent.
- Roofing shingles added between 5.0 and 6.0 percent.
- Vinyl soffit gave back 1.0 percent.
Once again, the market saw a lot of gyrations but very little movement.
Builders should be wary of hurricanes this time of year. Locking in bids for the next month, or so, may be a good idea. Lately, there have been a lot of job delays because of labor shortages and heat. The heat will subside in the next month, or so, but the labor shortage issue shows no signs of abatement, especially with the pending workers’ compensation increase scheduled to take hold October 1, 2016.
Expect items with heavy labor burdens to start increasing by mid-October. Some smaller companies may be forced to capitulate and go out of business. Every day, the small guys are just clapping their hands and closing shop. Make sure you have good subcontractors and be very careful about chasing nickels now, when later you might be paying quarters just to find someone to do the job. Builders who have strong subcontractor relationships should be just fine.
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 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 firstname.lastname@example.org.