July 2021 Whole House Commodity Index

The RoMac Building Supply Whole House Commodity Index dropped for the first time since November 2020, and in mid-July the Index dropped 11.4 percent to $50,973.  Wood commodities continued to adjust sharply over the last 30 days, but the Index did not drop more because metal related products and other building products continued to show strength and expanding lead times.  Once again, builders should be cautious in reading these drops in lumber prices and not get caught short on bidding future projects as the market remains red hot and supply issues persist in many of the building material sectors.

As builders consider pricing future projects, they should consider the following points:

  • Due to long-lead times in wood commodities and trucking issues, wood commodity pricing will be slow to come down. Drops in the wholesale and mill levels will take weeks before they are felt at your local dealer.
  • Lumber futures are currently printing up in September 2021 which indicates that many analysts believe the markets could have a moderate rebound.
  • Lumber pricing for pine and spruce dimensional has retreated to November,2020 levels, while plywood and OSB sheathings have pulled back to early April levels.  As compared to last year, the wood commodity markets remain high, and many analysts question the long-term production outputs as compared to demand.
  • The overall RoMac Whole House Commodity Index has declined to the same level as the first week of April 2021.  Major price increases in building material items other than lumber are keeping the overall cost of housing at historic levels.
  • The RoMac Whole House Commodity Index as compared to July 2020, just one year ago, is 39.2 percent higher.
  • The pricing of lumber, plywood, and OSB in this month’s Index is current as of today, and the rate of decrease in lumber has slowed significantly this week. It seems the market may be trying to find a bottom considering the view from the future.

These 6 points are guiding builders to simply look at their total project pricing and to not just focus on the drops in wood commodities.  The fundamentals for hot housing demand in the second half of 2021 along with unknowns like a bad hurricane or fire season out West, could reverse pricing quickly and dramatically.

Here are the significant price movers over the last 30 days:

  • Rolled poly for foundations was up 15.8 percent.
  • Wire mesh added 17.2 and is very hard to source.  Rebar jumped 19.3 percent on continued short supply.
  • Rod chairs and ties added almost 13 percent.
  • Most metal connectors and fasteners added from 11 to 18 percent as anything with metal is going up in price and harder to find.
  • 5/8 CDX pine plywood dropped 26.3 percent while 7/16 OSB sheathing gave back 13.2 percent.  Low inventories and a hurricane season do not bode well for continued long-term price drops.
  • 2×4-16 #2 pine dropped 49.0 percent while 2×6 declined 47.2 percent and 2×12 gave back 62.7 percent.
  • 2×4 dimensional #2 spruce lost 42.7 percent and 2×6 spruce retreated 43.3 percent.  2×4- 92 5/8 spruce #2 studs dropped 52.4 percent.
  • Truss pricing dropped 5.1 percent as higher-grade pine lumber was slower to drop in price, and the continued increase in metal plate pricing and labor to manufacture trusses dogged production line.
  • 4×4-8 treated post dropped 44.8 percent.
  • Rolled fiberglass insulation increased 8.0 percent as supply remains tight and manufacturing costs surge.
  • Roofing metal added 10 percent in cost and continued to have much longer lead times.
  • Wood colonial casing added 15.0 percent and base moulding increased 14.0 percent.
  • Garage Doors added a whopping 24.0 percent in costs as metal pricing continues to soar and lead times stretch out to 10 weeks plus.
  • Garage Door openers added almost 2 percent on high cost for metal parts.

 

Lead times for windows continue to spread out as glass has become harder to source. One manufacturer of patio doors is not shipping lock hardware with new orders as those parts are significantly behind in production.  A major provider of exterior doors has moved lead times from 4 to 8 weeks as backorders, raw material shortages, and labor are causing significant backlogs in manufacturing.

Unless there is a significant cooling in housing demand, the fundamentals of the markets remain extremely strong. It appears on the ground level that lackluster housing sales are not because of weakening of the housing demand, but rather the low housing inventory levels coupled with extended build times for new homes.   Additionally, there is   another factor many builders are not picking up; commercial construction is starting to heat up quickly after months of being on ice due the pandemic.,.  A rebound in retail building material sales is also expected as summer wanes and vacations will give way to more remodel and DYI projects.

Builders need to be careful bidding projects in the future as many negative factors remain in the market.

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. For great videos and Don’s weekly column, go to the Around The House Site to subscribe to our YouTube channel and weekly updates.