January 2017 Whole House Commodity Index
WHOLE HOUSE COMMODITY INDEX – January 2017
by Don Magruder, CEO of RoMac Building Supply
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for January 2017 increased 0.3 percent to $31,334.60. Concrete and rebar prices edged upward while other commodities were mixed. The general tone in the building supply sector is for increasing prices and more pressure on the supply chain as new sources of material are sought.
The notable movers in the Index for January were:
- Metal Rebar jumped 3.7 percent.
- Concrete increased a percent and some vendors added more.
- CDX pine plywood added 0.7 percent while OSB was more aggressive with a 1.4 percent increase.
- Spruce dimensional increased 0.1 percent to 6.5 percent on 2×4-16. The general concern is the future of the U.S.A—Canada Softwood Lumber Agreement and the real potential for countervailing duties later this spring. Some mills are now off the market in certain species.
- Pine dimensional lumber drifted downward from 6.3 percent for narrow widths to 12.2 percent for 2x12s. Expect that to change as weather and spruce becomes more expensive.
- Trusses added 0.3 percent on higher labor costs.
- Treated lumber lagged downward from pine.
- Increased freight costs are also impacting the commodity markets.
Since the start of 2016, the Index has increased 6.0 percent. With the caravan of increases announced in building material products for the spring expect 2017 to be worse.
My cracked crystal ball still shows higher prices and volatility. Builders should include a price escalation clause in their contracts to protect them for periods later in the year. The talk from the presidential campaign trail becomes real on January 20, 2017, and it appears the country could be heading from political uncertainty to policy uncertainty as everyone tries to figure out what is going to happen.
Short-term interest rate increases may get spring home buyers off the mark early; however, increased rates could have a chilling effect later in the year. My best advice to builders is to keep an eye on the markets and we will try to keep you updated.
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 romacfl.com to sign-up for the Index and other free market reports. To sign-up for this information via email, contact Rebecca Ballash email@example.com.