February 2022 Whole House Commodity Index

The RoMac Whole House Commodity Index (Index) for mid-February 2022 hit a record high again soaring 7.5 percent to $64,079 as sheathing and lumber pricing continue to firm coupled with overall inflation in other building material sectors. In January’s report, I cautioned the increases in that month did not bode well for the overall supply and inflation picture for the year. February’s numbers confirm these concerns especially given that most of the country, even Florida, dealt with much colder and wetter weather conditions over the last 30 days.  

While COVID-19 issues continue and of course, there are labor issues, the main crux continues to be the overall demand equation versus supply. The following numbers from the United States Census Bureau on housing starts clearly quantifies this theory.

After the housing crash of 2008, the yearly average number of housing starts in the United States from 2008 to 2020 was 983,000.  This is a record low in housing starts for a 12-year period by far since World War II.

The United States population is now estimated to be 329.5 million and in December 2021, housing starts were 1,702,000.

In 1979, the United Sates population was 225.1 million and, in that year, with an average housing interest rate of 11.2 percent, there were 1,745,000 housing starts.  This is very close to the number of housing starts the country had in 2021.

First, based on population growth, the United States has not been constructing enough housing for the last decade or better. In 1979, with similar housing starts as December of 2021, the glaring number is that the country has 104.4 more people.  These numbers make no sense.  Therefore, it can be presumed that multiple families are living together in homes and apartments.

The other unfortunate secret is that the average yearly low housing starts in the United States from 2008 to 2020 put a huge number of lumber and building supply mills and manufacturers out of business.  Some years, the market shrunk by more than 60 percent and during this time-period, most people in the supply chain were barely surviving, if at all.

Technology in the industry has been good and bad.  A lot of manufacturing equipment during the huge collapse after the housing bust became obsolete with parts unavailable or unsupported software platforms.  The industry must re-tool which requires a lot of capital and time.  Once the new technology is in place, it should help, but that is a multi-year process. 

I know others have their own theories, but it appears this current housing boom along with the supply chain disruptions will continue for 2022 unless there is some form of Black Swan economic event.

The following are the notable price movers in February’s Index since last month. 

  • Foundation rebar increased 2.2 percent on continued tight supply.
  • 19/32 CDX increased 12.8 percent and OSB sheathing added 41.3 percent.  Manufacturers are operating these mills so hard that some are experiencing equipment breakdowns or periods of maintenance.  Capacity, coupled with challenging imports, continue to plaque the sheathings market.

  • Boxed nails increased 11.0 percent as nails continue to experience tight supply and higher pricing.

  • Dimension spruce increased again this month.  2×4 spruce added 6.9 percent while 2×6 spruce jumped 19.4 percent.

  • 2×4- 92 5/8 #2 Western Studs increased 9.0 percent on tight supply, but the specialty studs (odd lengths) are very tight.  Concerns are increasing about the truckers’ strike in Canada.

  • Narrow width pines dropped a little in the last couple of weeks with 2×4 pine dropping 7.8 percent and 2×6 pine pushing lower 9.5 percent.  Wide-Width 2×12 pine added 8.8 percent.  Builders should look very wary as most of this is probably more weather-related pricing declines from cold, icy weather in the south.

  • Truss prices increased 10.8 percent on the inventory lag in pricing from January and much higher labor costs in production labor.

  • Treated 4×4-8 post added 11.3 percent as supply tightens in preparation for the spring dock and deck season.

  • Poly iso board increased almost 5.0 percent and supply is very tight with extended lead times.  Expect future price increases.

  • Insulation batts increased 10 percent on higher costs from the manufacturer.

  • Architectural roofing shingles increased 7.2 percent on announced price increases due to higher oil and transportation costs.

  • Window supplies remain problematic with extended lead times and struggles for accurate distribution from manufacturers.  Despite the long lead-times and shipping struggles, windows increased 14.0 percent in price.

  • Water-proof bathroom sheathing increased 7.5 percent on manufacturing cost increases.

  • Exterior door unit pricing jumped 12.3 percent on higher door slab pricing from manufacturers and increased cost to produce units.  Plus, 8-foot door units and internally glazed glass door slabs continue to have very long-lead times with limited availability.

  • Wood mouldings continue to have supply issues, and this is leading to almost quarterly cost increases.  Base and casing pricing increased almost 21.0 percent in the begging of February.

  • PVC woodgrain trim boards added 8.7 percent while vinyl soffit added almost 12.5 percent on higher cost and tight supply.

Higher wood commodity pricing coupled with continued inflation in other sectors caused by tight supply resulted in the record levels of this Index.  Additionally, increased fuel pricing along with serious trucker shortages are inflating prices at all levels of the supply chain. 

Short-term concerns are simple.  As the country approaches March and the weather improves, coupled with the lack of housing inventory and the overall demand equation, things could get worse.  Some builders and homeowners believe there will be a price that will drive out buyers or maybe, increased interest rates will do it.  My view is that there are too many buyers with too much cash in hand to result in any immediate moderation.  Builders should prepare and have price escalation clauses in their contracts. 

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.

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