February 2020 Whole House Commodity Index

By Don Magruder

The RoMac Building Supply Whole House Commodity Index (Index) for February 2020 surged 2.8 percent to $33,800, which is just under the price for March 2019; the high-water mark for the year. Last month in this report, I said, “My forecast for 2020 is inflation.” I also argued that sagging wood commodity prices were masking the overall inflation in other sectors of building materials such as doors, windows, and other building components. This month’s Index proves that thesis to be correct, as inflation in wood commodities and price and freight increases in other products has dumped a hefty increase on builders.

Despite better housing numbers at year-end, the activity remains historically low based on the population increase. Also, will this market have legs or do these prices retreat because of the mild winter? Unless there is sustained activity in housing to include late spring and early summer, the pricing increases may be more of a result of a mild winter and early building season up north.

The following are the notable price movers on the Index:

Foundation wire mesh was up 5.1 percent on higher import pricing and shrinking availability of low-cost steel.
Pine CDX was up 13.3 percent while OSB sheathing was up a whopping 37.0 percent or plus $2.50 per sheet — huge increases for a non-hurricane month.
Pine dimensional lumber has been mixed. 2x4s were down 5.7 percent and 2x6s were down 4.6 percent. Wide width 2×12 was up 14.0 percent on flooding rains in the south, limiting the harvesting of larger pine stumpage.
2×4 spruce studs were up 11.2 percent and concerns over a rail strike in Canada is questioning the availability of spruce, as railcar deliveries could be late.
2×4 dimensional spruce was up 5.1 percent and 2×6 was up 7.9 percent. Delivery concerns could impact pricing more.
Treated 4×4 posts were up 2.8 percent and treated pine 2x4s posted a 3.4 percent decline.
Lower pine 2×4 prices pushed truss pricing down 1.7 percent.
Drywall added almost 2 percent on a soft yearly increase. Questions remain if that increase can stick.
Moulding prices soared plus 7 percent as concerns over the coronavirus in China limiting shipments and possible tariffs on Brazil wood.
Masonite implemented a 25 percent increase on interior door slabs, which resulted in increases in door unit pricing from 10.2 percent to 23.5 percent for bifold units.
A yearly 5 percent increase on windows was implemented the first of
February.

This is a long list of price increases and it flows completely in all aspects of the home except for concrete, which remained steady. Built into these increases were freight charge increases, as trucking labor continues to soar. Concrete pricing will go up at some point soon due to trucking — you can bet on that.

Here are some takeaways from this month’s Index.

Inflation is here because companies are to the point they must increase pricing to cover costs. The deflation of 2018 has been wiped out this month and despite the ups or downs of the housing market, there will be inflation.
Continued trade issues will continue to roil markets. Steel, moulding, and imported plywood will be targets this year.
Finally, the coronavirus in China is creating disruptions in moulding production and other components in the building supply industry. If this situation continues and grows worse, there could be shortages in import items like cabinets, fixtures, plumbing parts, mouldings, etc.

Builders should include a price protection clause in their contracts and they should be aware of lead times before ordering products. It is imperative that product decisions be made earlier in the process and selections are streamlined.

Finally, on the coronavirus, the effect on the United States housing market thus far could only be some supply disruptions. An outbreak of the virus in America would be devastating for the housing industry, especially Florida, which relies so much on tourism, cruise ships, and winter residents. It appears these thoughts are starting to find a home in the back of the minds of many in the construction industry.

The point is simple — this month’s increases could quickly change if the virus is deemed a real threat to Americans. Builders should closely monitor developments.

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.