January 2022 Whole House Commodity Index
By Don Magruder
The RoMac Whole House Commodity Index (Index) for mid-January 2022 has hit a record at $59,339 which is 12.4 percent higher than December, and 3.1 percent higher than our previous record-high of June 2021. The one-year comparison to January 2021 looks even worse as it is 29.0 percent higher. This does not bode well for pricing in 2022 as these record highs were hit in January during the cold weather months up North. Supply is tight in all categories as demand continues to outstrip capacity, and the huge wave of the Omicron Coronavirus is creating significant labor issues throughout the supply chain.
Here is the unnerving comparison of this update. The lumber and sheathing markets are not at the record levels that this Index recorded in June. The Index is at record levels due to the other price increases for components which make up this Index. Below are some real comparisons of the wholesale delivered prices on lumber and sheathing products on this Index from June 2021 to January 2022.
• 2×4- 92 5/8 SPF Studs #2 are 19.4 percent less in January 2022 as compared to June 2021.
• 2×4- 16 SPF #2 is 1.4 percent more in January 2022 as compared to June 2021.
• 2×12-16 #2 Pine is 34.2 percent less in January 2022 as compared to June 2021.
• 5/8” (19/32) CDX is 24.5 percent less in January 2022 as compared to June 2021.
• 7/16 OSB is 32.7 percent less in January 2022 as compared to June 2021.
My analysis of dimensional #2 SPF is indicating that these markets can go higher and based on the demand equation we are seeing in January, by the winter thaw in March, there is a good possibility those record levels of June 2021 could be topped. Builders should account for these possible huge price increases in lumber and be aware of the inflation which is happening in all other sectors of the building material supply chain.
Below is a breakdown of the price movers for January 2022 as compared to thirty days ago in December.
1. Foundation wire mesh added 18.4 percent while rebar settled 2.1 percent lower on more availability. Expect foundation metal to be extremely volatile this year due to the United States Infrastructure plan that is ramping up.
2. Concrete added 6.0 percent, while blocks increased 8.0 percent. Increasing demand by the federal government on concrete and blocks will tax an already strained supply chain. Keep in mind- no one outbids the federal government on concrete and steel.
3. Mortar mix added 8.1 percent and masonry sand added 7.3 percent on cost increases and additional freight.
4. 5/8 CDX jumped 33.5 percent and OSB jumped 42.5 percent as mills are being oversold. Some are concerned that cash positions put suppliers in a lower inventory position at year-end and many are trying to build inventories to cover demand.
5. Spruce dimensional 2×4 added 22.3 percent while 2×6 jumped 27.5 percent. 2×4- 92 5/8 studs added 26.9 percent. All were affected by higher freight rates and stifling demand.
6. The pine markets are running hard as truss plant demand is stripping resources. 2×4 #2 pine added 45.2 percent with 2×6 pine jumping 73.4 percent. 2×12-16 pine jumped an unimaginable 75.5 percent. Coupled with increasing pricing from the mills, were much higher freight rates being adopted at the first of the year.
7. Trusses increased 18.5 percent, but these prices are lagging the market. Increase pine, plate and labor costs are burdening truss plant production which is being affected by limited plates and the Omicron virus.
8. 4×4-8 treated post jumped 20.7 percent while 2×4-16 borate treated pine added 32.5 percent.
9. Rolled house wrap increased 10.0 percent on higher cost.
10. Metal roofing accessories increased 10 to 20 percent as metal cost continues to soar.
11. 1⁄2- 4×12 drywall jumped 8.7 percent with most other types of drywall adding 5 percent. Specialty drywall is getting harder to source.
12. Interior door pricing increased 10.0 to 17.2 percent on high slab and moulding pricing along with increases in labor and freight costs.
13. Cement siding was up almost 5 percent with supply extremely limited.
14. Garage doors added 4.0 percent on monthly increases for steel.
Next month, expect increases in exterior doors, windows, and shingles as many manufacturers have pre-announced increases.
What is happening in January is not a good sign of inflation for the sector in 2022. Builders need to prepare, and honestly, be upfront with clients. Additionally, with housing inventories in Florida at about a month, there are no signs of the demand equation easing. In fact, threats of rising interest rates will push buyers more urgently in the first half of this year.
One cautionary note for suppliers and builders is that mills, manufacturers, and dealers are currently somewhat overwhelmed. A strange triage phenomenon has begun over the last 6 months which I believe is not good for anyone. Many companies are deciding who they can partner with and sell to successfully, and we are seeing decisions made to drop customers. This is at all levels.
I understand it is extremely frustrating for everyone. Nothing is easy, but don’t give your supplier a reason to drop you as a client. Daily, everyone is being approached in the supply chain to take on more business, and if you have someone who is working hard for you, be patient and understand they are doing the best they can.
We are in a time-period in which innovation and solutions will win. As an industry, we need to look at doing things differently, for example, hand framing trusses, changing window and door sizes to correspond with available stock, and re-thinking how the home is designed and constructed. As concrete becomes tighter this year, wood may be your best option.
This year, when the federal government starts in earnest rebuilding infrastructure, steel and concrete could become extremely tight. As I stated earlier, no one will out-bid the federal government for products. Prepare now and have escalation clauses in your contracts along with clauses which protect you against supply chain delays. If you need a base price escalation clause, we have developed one for this Index. Contact Keri Sudman at Keri.Sudman@RoMacFl.com for a copy.
Good luck and protect yourself.
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.