February 2021 Whole House Commodity Index
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In January, I predicted the commodity and building material markets could get uglier given historic trends and despite significant winter weather in the northern tier of the country. Unfortunately, those written words have come true. The markets continued to escalate over the last month and supply in many areas, like OSB, has tightened.
The RoMac Building Supply Whole House Commodity Index (Index) for February 2021 set a new record high by reaching $47,433, which is up 3.1 percent from mid-January. Because of the dollar amount, the percentage really undervalues the true dollar increase—only two items retreated in the last 30 days. Although trusses dropped 1.8 percent on mid-month pine moderation, that appears to be temporary. In addition, 2×6 pine dropped 13.1 percent on better supply.
There is no way to put a positive spin on the lumber and building material markets—they are ugly, and as the winter thaw occurs expect the things to get worse. I believe there will be spot shortages and significantly longer lead times for doors, windows, roofing, sheathings, and certain popular sizes in lumber. As the pandemic resolves with the rollout of the vaccine, housing and construction will heat up, unleashing a year of pent-up demand. The next few months might be less about supply and more about being able to obtain building materials—hold on and stay informed.
There is another issue creeping in for many manufacturers and suppliers—cash. With 30 to 40 percent higher prices for materials and much longer lead times, which require much higher inventories, cash is starting to crunch for some builders. This crunch in cash could strain supply chains. More importantly, shortages in building materials and labor discourage greenfield operations, which means there will be little added capacity in the short-run.
Here are the significant price movers over the last 30 days:
- Wire mesh jumped 21.3 percent and rebar added 5.0 percent on short supply and import issues.
- 3000# concrete was up 5.5 percent while block increased 4.8 to 6.5 percent.
- CDX pine plywood rose 12.8 percent, or $3.50 per sheet, while OSB added 7.2 percent, or almost $2.00 per sheet.
- 2×4 pine added less than 1.0 percent while 2×12 pine jumped 9.8 percent.
- 2×4 dimensional spruce was up 6.2 percent and 2×6 spruce increased 10.6 percent.
- 2x4x 92 5/8 spruce studs added 8.8 percent, or almost 50 cents each.
- 4×4-8 treated posts were up 2.4 percent.
- 1-3/4” x 11-7/8” laminated beams were up a whopping 21.0 percent.
- 30-year architectural shingles added 7.6 percent while synthetic felt jumped 12.8 percent on changes to the Florida Building Code and increased demand.
- Roofing metal added almost 10.0 percent while other metal strapping increased in the single digits.
- Exterior door pricing was up 6.2 percent for one door and 10.3 percent for another door. This is a previously announced annual price increase.
- Vinyl soffit prices jumped 7.4 percent on soffit and 10.5 percent on accessory trim.
- Rolled seal-sill material added 8.9 percent.
January was a brutal month, and February is the time of year for annual price increases for many items. Further price increases for items such as windows and roofing are being preannounced and lead times for those items are very tough right now.
Here are my suggestions to builders:
- Prepare detailed estimates and double check specifications to prevent mistakes.
- Finalize details promptly and order items early due to much longer lead times.
- Special orders will take longer to get and could hold up your project. Check the details for special order items closely and order promptly.
- Now is the time to have a good relationship with suppliers—add them instead of subtracting them.
- Update any pricing more than 30 days old.
It is imperative that you have a Price Adjustment Clause in your contracts to protect yourself regarding pricing. RoMac Building Supply offers, for free, a Price Adjustment Clause for Contract, which is linked to this Index. It can be obtained by contacting Rebecca Ballash.
Finally, as the winter thaw occurs and the pandemic resolves, the markets could worsen in the months of March and April setting more records.
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 through our contact page. For great videos and Don’s weekly column, go to the Around The House website to subscribe to our YouTube channel and weekly updates.