December 2019 Whole House Commodity Index

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December 2019 Whole House Commodity Index report

December 2019 Whole House Commodity Index

by Don Magruder

The RoMac Building Supply Whole House Commodity Index (Index) for December 2019 dropped 0.5 percent to $32,990.94 as wood dimensional lumber and sheathing panels saw declines as the weather turned colder and builders faced the prospect of slowing seasonal demand. Housing data continues to be on a roller coaster with no sustained direction charted. There is little to no improvement in the housing demand equation during this time of year and prices are struggling to hold onto gains made earlier in the fall.

With all the pricing gyrations of 2019, December’s Index is only 0.2 percent higher than January 2019. Although the overall trend for the year is positive, the Index has dropped 9.5 percent since its record pricing level of June 2018. After a year and a half of pricing declines in many areas of the supply market, 2020 could usher in an inflationary period as mills and manufacturers struggle with profitability and an uncertain housing market.

Over the last 30 days, most items (other than wood commodity products) remained flat. For the most part, the wood commodities are trending slightly downward fueled by activity over the last couple of weeks.

Here are the notable price movers in the Index for the month:

  • Foundation rebar was down 3.4 percent and wire mesh dropped 0.5 percent on a possible trade deal.
  • 2×4 pine declined 8.3 percent while 2×6 pine gave back 9.0 percent. 2×12 pine was flat.
  • All dimensional spruce traded in a range of flat to a decline of 0.6 percent. It seems the pricing runup of spruce over the last few months is winding down.
  • CDX pine plywood was down 2.7 percent while OSB sheathing gave back 6.2 percent.
  • Roof truss prices declined 1.3 percent on lower pine pricing.
  • 1×6 PVC trim boards were up 3.0 percent on an early yearly price increase.

While the news on price movers is somewhat slow, price increases are stacking up for after the New Year. If the economy remains healthy, expect more inflation in 2020 versus this year. Labor and fixed cost increases are forcing many companies to review their strategies if they are to remain viable. Expect inflation early in the first quarter.

For builders, the quicker you can start projects and lock in pricing, the better you’ll be regarding home costs. While it appears, closer to the election could spell some economic trouble, builders should expect a good market with higher pricing until that time. Implementing a price protection clause in your contracts is a good idea.

From everyone at RoMac Building Supply, we wish you and your family a very Merry Christmas and a prosperous, safe New Year!

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.