December 2020 Lumber and Commodity Report
The RoMac Building Supply Wood Commodity Index (Index) for December roared back with a vengeance as the markets slammed the brakes on further price declines and hit the gas on price increases. Delays caused by the COVID-19 pandemic refuse to subside in a housing market, which is showing signs of heating up. After the price movements in the last few weeks, it is extremely possible that come January and February the wood commodity market could be back in the dark times of early fall—record high pricing and tight supply.
The RoMac Building Supply Wood Commodity Index soared 20.6 percent as increased pricing was unabated. Only one item—treated 2×4-16—dropped in price, and this item lagged due to the nature of manufacturing. To see the market this strong around Christmastime as winter is setline in is very unusual and could be a negative sign of things to come. Builders should update pricing and reprice models and jobs. Most importantly, builders must improve planning to not get caught short in supply. Lead times will begin stretching out in January.
The dimensional lumber portion of the Index was up 35.5 percent, or $211.16 per thousand. Huge runups in spruce studs and dimension led the way. Studs were up nearly 40 percent and 2×4-16 spruce increased 35.9 percent. Some increases were more given the length. 2×12 pine was up from 38.1 to 42.9 percent as pine closely followed spruce. At this point, there is little pricing relief in sight as we head into the New Year.
The sheathing portion of the Index increased 10 percent with CDX pushing the highest increase. 15/32 CDX increased $165 per thousand, or 32.4 percent, while 19/32 CDX added 27.9 percent. On the other side, OSB sheathing only added $25 per thousand, or around 5 percent on average. For months, the pricing between CDX and OSB has been off-kilter and the market is correcting itself by lifting up CDX pricing rather than dropping OSB pricing. This indicates these prices are firm with a limited chance of retreating.
If you view the building material supply chain in total, you will see much longer lead times, higher pricing, and problems with special order shipments. Builders should plan accordingly, especially when it comes to windows and doors.
Indications are the first quarter of 2021 could be a tough time for pricing and supply. Right now, there are not any signals these markets are going to tail off. That is the reason why builders should no longer resist raising pricing. Florida could see a housing boom in 2021 and January’s pricing could be reflective of the entire year.
Finally, I hope that everyone has a Merry Christmas and most prosperous New Year. Please be safe and do not forget about the COVID-19 pandemic—protect yourself.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida (Romacfl.com) and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him through our contact us page.