December 2021 Whole House Commodity Index

By Don Magruder

The RoMac Whole House Commodity Index (Index) for mid-December 2021 escalated dramatically as wood commodity products soared in pricing over the last 30 days.  The Index increased a whopping 11.3 percent to $52,772 which is 32.0 percent more than one year ago, and only 8.3 percent below the record high level that was set in June of this year.  The lumber and sheathing markets are on fire, and it bucks the historic trends of lowering prices this close to the holiday.  This does not bode well for 2022.

What is even more concerning is the announced price increases from manufacturers throughout the building material supply chain for January. Announced increases are anywhere from 15 percent to 30 percent as all sectors report much higher costs for labor, raw materials, and shipping.

The issue is an overall capacity problem in America to produce enough products to fuel the increases in housing starts. For more than a decade housing starts have been stuck in an area less than 1.4 million units, and as the pandemic resolves, coupled with a surge of baby-boomer retirees and millennials entering the housing market, starts are at the highest level since 2006-2007. The difference is the country is in a housing boom and not a housing bubble.  People are building homes to live in, not as investments. With backlogs in many products out to late spring and mid-summer, this will not resolve in 2022.

Additionally, the devastating Kentucky tornado outbreak and the huge swaths of destruction that was left behind will only exacerbate an already strained supply chain.  On top of this, the signing of the Federal Government Infrastructure bill, which will fund nearly a trillion dollars in projects, will add additional pressure to these already exhausted markets. There is a good possibility the supply situation in America will be worse in 2022 than it was this year.  Securing material and finding labor, not price, will be the biggest challenges for most builders because the market is showing it can cope with higher home prices.

The significant price movers over the last 30 days were the following items on the Index.

  1. 5/8 CDX pine plywood jumped 34.4 percent while OSB added 16.2 percent.
  2. 2×4 spruce jumped an unimaginable 49.9 percent while 2×6 spruce added even more at 52.1 percent.
  3. Spruce 2×4- 92 5/8 spruce studs surged 53.7 percent and many specialty sizes are unavailable.
  4. 2×4 pine added 20.3 percent, 2×6 pine was up 49.1 percent, and wide width 2×12 pine jumped 18.3 percent.  Many truss plants are finding it very difficult to find specialty graded pine for truss production.
  5. 4×4 treated post added 1.6 percent and 2×4 borate lumber jumped 18.4 percent.
  6. Metal products continue to increase as wedge anchors added 6.1 percent.
  7. Monthly unannounced price increases in garage doors are commonplace as garage doors increase 8.3 percent and openers added 8.6 percent.
  8. Cement lap siding jumped 4.3 percent as most manufacturers are sold out with proposed increases announced in January.  Cement siding is becoming strained to find product.
  9. A 5.3 percent relief in PVC trim boards appears to be more transitory as wholesales clear some products.

This Index is 32.0 percent higher than last December, and last year was a record setter for high pricing.  There are zero indications that anything is going down in price, and in fact, many sectors of the supply chain seem to be getting more stressed.  It does not look encouraging at all for 2022.

Builders should be timelier and have more detailed plans to lineup materials.  Also, it is a good idea to have plans drafted for in-stock merchandise and to avoid specialty products.  Roof and floor truss production will not be able to keep up with demand, and delays in securing equipment will challenge anyone trying to open a new plant.

Here are some simple strategies to think about in order to maintain progress in the upcoming year:

First, builders should consider changing smaller and standard home plans to conventional framing, and as difficult as it maybe, framing subcontractors need to start training crews on how to frame roofs and ceiling joists.  Additionally, suppliers will have to realign lumber lengths to accommodate conventional framing, but this will be the best answer for many builders and subcontractors to keep things moving.

Secondly, when available, the conversion to engineered floor joists must be considered.  Yes, engineered products are tight also, but builders must get in the mindset of solving the problem instead of waiting on solutions. Across the country, homes are built everyday with conventional framing and engineered wood floor systems., Florida builders will need to incorporate all methods of construction to keep up with demand. 

It is imperative that all builders incorporate a price escalation clause in their contracts because these supply chain disruptions are not resolving anytime soon. 

Builders- Hang on- 2022 looks like the ride may get a little rougher.

Finally, thank you for reading our monthly Index and thank you for the support you have shown us at RoMac Building Supply.  It is my wish that God bless your home during the holidays and may it be filled with love, laughter, and pure joy.  Merry Christmas. 

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. To sign up for the Whole House Commodity Index and other free market reports click the button below.