December 2020 Whole House Commodity Index
In last month’s RoMac Building Supply Whole House Commodity Index, I wrote the following:
I expect continued shutdowns at all levels because of the virus. Pricing will fluctuate but remain high, and we could see spot shortages by spring. Stability will come to the markets when the Coronavirus is resolved by either good public healthcare or a vaccine. Over the next three to four months, builders should price projects on the high side as volatility could catch many short again.
Unfortunately, over the last 30 days this has come true and indicates the worst is yet to come. Over the last couple of weeks, prices have escalated sharply and most manufacturers in the building material sector have announced significant price increases after the first of the year. It appears there is a strong probability that in January and February these markets could return to the record pricing levels of early fall with just as much shipping turmoil.
The RoMac Building Supply Whole House Commodity Index (Index) for mid-December 2020 increased to $39,982, or by 3.1 percent over November. This wiped out about half the decrease from October and the price increases over the last two weeks are rising unabated. To see these sharp price increases just prior to Christmas as the snow begins to fall up North is highly unusual and not a good sign for 2021.
The following are the notable price movers in the Index since last month:
- Rebar is up 5.2 percent while wire mesh added 4.3 percent. In the last week, scrap metal pricing is up almost 20 percent. Expect these prices to go even higher.
- Masonry added 2.0 percent on higher costs from manufacturers.
- CDX pine plywood is up 25.2 percent while OSB sheathing added 3.9 percent. The market is adjusting the disparity in these products by increasing CDX prices, which is unusual.
- 2×4 dimensional spruce is up 28.4 percent while 2×6 spruce added 39.7 percent. Plus, premium lengths are harder to source.
- 2×4-92 5/8 spruce studs are up 22.6 percent, or almost $0.90 per board. Once again, premium cuts are harder to source.
- Dimensional pine lumber is up across the board. 2×4 is up 18.7 percent, 2×6 added 47.6 percent, and 2×12 increased 33.8 percent. As the treaters step in for spring buys, expect pine pricing to remain firm with product availability becoming more challenging.
- Although trusses declined 8.8 percent on a lag of new higher priced inventory, expect pricing to be up significantly in January.
- 4×4-8 treated posts are up 18.6 percent and borate treated 2×4-16 is up 16.9 percent.
- Insulation increased 5.2 percent on high costs from manufacturers.
- Tile backer added 7.1 percent on increased manufacturing costs.
- Plywood clips added 12.0 percent as suppliers made wholesale increases to product lines.
The level of these increases for this time of year are stark, and the news only gets worse. Not only are window prices going up, but their lead times are also expanding out. The lead times for many window companies are out to mid-March and April for new orders. The problem in the state of Florida is that builders cannot get past framing inspections for new residential construction without windows. This could really hamper production. Exterior door manufacturers are adding 9.0 to 11.0 percent in January while interior door manufacturers are trying to make a 15.0 percent increase stick.
Concrete and block suppliers have announced a $7.00 per yard increase in concrete effective January 1, 2021, along with an increase of $0.08 per unit for blocks. Many drywall companies have announced a 20 percent increase after the first of the year while roofing manufacturers have announced price increases from 4.0 to 6.0 percent in February. Plus, there are extended lead times for shingle deliveries as well as significant limitations on color availability.
Expect longer lead times and higher pricing in most items because of the COVID-19 pandemic and labor shortage. Builders ought to avoid a lot of specialty products, which could be measured with extended lead times in the coming months.
Builders should reprice models and projects because there is no indication now that pricing relief will occur in the first quarter of 2021. More than likely, pricing and availability will be much worse at that time than they are today. It is imperative that you have a price adjustment clause in your contracts. RoMac Building Supply offers a price adjustment clause that is linked to this Index, and it can be obtained for free by contacting Rebecca Ballash at Rebecca.Ballash@RoMacFL.com.
Despite the challenging pricing and the long lead times, many of us are blessed this Christmas—we remain open for business. Keep in your thoughts and prayers those who have lost their job or had to close their business. When you start to feel frustrated, take a moment to count your blessings. Merry Christmas and Happy New Year! More importantly, please be safe and protect yourself and your family against the Coronavirus.
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 www.AroundTheHouse.Tv to subscribe to our YouTube channel and weekly updates.