August 2017 Whole House Commodity Index

March 2019 Whole House Graph

WHOLE HOUSE COMMODITY INDEX – August 2017

by Don Magruder, CEO of RoMac Building Supply

Uncertainty—here’s that word again.  There is uncertainty in the geopolitical world, uncertainty that anything can get done in Washington, D.C., and huge uncertainty in regards to the course of the U.S.A.—Canada Softwood Lumber Agreement.  All of this uncertainty is starting to cause buyers, builders, and suppliers to question the long-term outlook of housing.  No doubt, as long as this uncertainty remains you will see additional months where the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) declines like it has over the last 30 days.  The Index dropped 0.2 percent to $32,505, which marks three out of four months in decline.

There was little appetite to increase prices, with most markets being mixed. The following items are the notable price movers for the August Index:

  • Rebar added 0.5 percent on talks of tariffs.
  • CDX pine plywood dropped 3.0 percent while OSB sheathing added 6.9 percent.  Typically, CDX leads the sheathing markets and it will be curious to see if OSB follows this month.
  • Dimensional spruce was mixed as 2×4-16 pricing was down 1.5 percent and 2×4 studs erased 2.3 percent of increases.  However, 2×6-16 spruce added 3.2 percent.
  • Pine pricing is up and down depending on width and length.  2×4 was up 3.2 percent, 2×6 added 8.3 percent, and 2×12 pine printed down 1.1 percent.
  • Truss pricing was down 1.1 percent on lower wholesale pricing.
  • Treated posts were down 2.8 percent.
  • Aluminum ridge vents added almost 5.0 percent.
  • Wood moulding prices were up 4.2 to 6.7 percent on higher import pricing.
  • PVC trim siding was up almost 2.0 percent.

The inconsistent movement of pricing in the market is a microcosm of the uncertainty that exists.

Reports of a deal with the U.S.A.—Canada Softwood Lumber Agreement could mean a big decline in pricing initially. The deal being floated would be more about restricting imports to only 30 percent of the total United States market and less about duties.  Manufacturers in the United States have rejected the measure because it fails to prop up pricing.  One big concern is that U.S. manufacturers could not keep up.  One expert believes the capacity in the United States is about 68 percent, at best, and that would mean imports from other areas like Europe and Russia would fill the gap caused by the lack of Canadian wood.

This agreement would deal with import quantities and not artificially raise lumber pricing through duties, which is the real goal of American producers—to raise prices to increase profits.

Be on the watch for hurricane season.  Any threat will mean a quick bump in the markets and a strike by a major hurricane would get the markets running until November. Builders should keep a little in their back pocket in case of an emergency.  Of course, if the uncertainty gets worse expect the markets across the board to react similarly.

One last cautionary note.  Keep an eye on the Chinese trade review by the Trump Administration.  If large tariffs are implemented, that could mean short inventories and large price increases in all steel related products—including nails, rebar and wire mesh.

Until next month, pray for clear weather and clear heads in Washington, D.C.

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 rebecca.ballash@romaclumber.com