February 2018 Whole House Commodity Index
WHOLE HOUSE COMMODITY INDEX – February 2018
by Don Magruder, CEO of RoMac Building Supply
The RoMac Lumber & Supply, Inc. Whole House Commodity Index (Index) for February 2018 increased a whopping 2.8 percent to $34,030.08 as the January spark in the commodity market raged into a full-fledged flame in February. This type of increase in the dead of winter is unusual—is this a prediction of what’s to come this spring or will this price run flame out when the weather turns warmer? Little doubt, it depends on housing starts and that is the question. The steep decline in housing starts in December coupled with only a 2.4 percent increase in homebuilding starts in 2017 is leading some to pause and see if this price runup can be sustained.
One big element in the recent price increases is trucking. Prices are going up and availability is being stretched with new record keeping. This will only grow worse during the spring as agriculture competes for available trucks.
The big price movers in the Index from mid-January to mid-February were:
- Foundation rebar was up 12.1 percent on the United States trade policies and tariffs.
- 2×4 yellow pine added 12.1 percent while 2×6 was up 7.9 percent and 2×12 pine added 19.4 percent.
- The heavy increases in pine pricing forced truss prices up 5.0 percent.
- Spruce pricing was also up—2×4 studs added 3.6 percent, 2×4 spruce increased 6.1 percent, and 2×6 spruce posted the smallest gain at 1.5 percent.
- CDX pine plywood increased a strong 7.8 percent while OSB sheathing added a whopping 16.8 percent. Mills are doing a much better job managing inventories to demand.
- Exterior doors were up 3.0 percent on higher costs from manufacturers.
- Engineered wood was up 18.0 percent on increased production cost.
With all the chaos in Washington, D.C., the threat of tariffs, interest rate concerns and changes in the tax law (which hurts secondary housing), the housing market could weaken. In my view, there is just a likelihood pricing in April could be lower than February. The next two months of housing numbers will be the best indicator of pricing for the year.
To be safe, builders should beware of pricing projects for March and April with January’s pricing as warm weather and new tax cuts could make the markets volatile. Now is the time to include a price adjustment clause in your contract. If you would like one based on this Index, please email Rebecca Ballash at Rebecca.Ballash@RomacLumber.com for a copy.
Good luck and Happy Valentines Day!
The Ro-Mac Lumber & Supply, Inc. 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 Ro-Mac Lumber & Supply, Inc. in Central Florida. Go to www.romaclumber.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@RomacLumber.com.