August 2019 RoMac Whole House Commodity Index

August 2019 Whole House Graph

Today, the yield on the 2-Year Treasury was 1.588%; however, the 10-Year Treasury yield dropped to 1.576% creating an inversion, which is a bright flashing red light of a recession. In short, there should be no reason why an investor is making less on longer term bonds unless there is a belief that slower economic times are in the forecast.

Pricing in the building material and commodity markets is flashing bright yellow, if not soft red, as pricing continues to struggle to find a bottom. The RoMac Building Supply Whole House Commodity Index dropped 1.0% to $32,545 as lumber and panel prices continued to drop over the last 30 days. The first signs of other pricing erosion are occurring in other scopes, such as wire mesh and drywall, with little appetite to increase pricing in other areas. Overall, housing demand reports over the last 30 days have been unimpressive and disappointing, which indicates the demand equation continues to drive this market. A slow start to hurricane season is providing no hope that a floor can be cemented.

Here are the notable changes in this month’s Index:

  • 2×4 yellow pine was down 1.2% with 2×6 dropping 3.9% and 2×12 pricing down 6.5%.
  • #2-dimensional spruce 2×4 was down 8.2% and 2×6 gave back 5.7%. Spruce studs were off 7.6%.
  • Trusses were up 2.6% on higher labor costs and increased lumber prices from the prior month.
  • Treated posts were down 2.9%.
  • CDX pine plywood was down 9.1% and OSB sheathing was off 11.8%. The pricing on OSB is nearing recessionary prices. They have a real over-supply issue with new plants online.
  • Foundation wire mesh was down 3.0% with a willingness to cut deals on rebar.
  • Drywall pricing dropped 3.4% on special buys.
  • Casing prices rebounded this month 14.3% on higher import costs.

The pricing retreats this time of year considering the hurricane season are a significant warning sign.

The pricing direction in the next two months depends on the hurricane season. Unless there is a major catastrophe, the markets may move little to moderately on a threat or minimal hurricane strike. Concern is growing—the brighter flashing red signs in the economy could depress housing demand further, which will compress pricing markets further.
Over the next 30 days, keep your eyes on the weather and the bond markets—both could indicate where housing and these markets are going. Short-term pricing protection is a good idea. Good luck and let’s start hoping for green flashing lights!

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@romacfl.com. For great videos and Don’s weekly column, go to AroundTheHouse.tv to subscribe to our YouTube channel and weekly updates.