June 2014 Lumber and Commodity Report

 Sized lumber


by Don Magruder, CEO of RoMac Building Supply

The Home Builders Association Lumber and Commodity Report is no doubt strapped in a seat on the roller coaster of housing uncertainty. Over the last 30 days, the Index dropped 7.0% to $317.56 per thousand; however, during the prior 30-day period it increased 9.5%. That is a 16.5% swing in pricing over a 45-60 day period. There is no wonder why dealers and suppliers are keeping inventories low, and this is all the more reason why builders should have some type of price escalation clause in all of their contracts.

The dimensional wood portion of the Index dropped 4.6% as most items, with exception of narrow and wide width pines, retreated. 2×4 pine was up 8.7% in some lengths while 2×12 pine held firmly on the previous month’s gain. Spruce studs dropped 1.7%-4.0%, depending on size, while dimensional spruce retreated on average 9.0%. The housing industry remains mired in spotty, uncertain demand, and this is why momentum in the markets cannot take hold.

The sheathing portion of the Index did not do as well. Popular sizes in CDX pine drifted downward 2.7%-7.2% while OSB sheathing went into full retreat, giving back $28-$37 per thousand (or 11.3%-16.8%). Mills searched for buyers, and found the buyers had no appetite to purchase. Many who felt the prior month was the beginning of a summer run-up in pricing went ahead and bought; they are kicking themselves now. Dealers will have to work out these older, higher-priced items.

Steadiness and confidence are needed in housing. In my view, the commodity market is the best indicator of the health of the American housing market. There is no doubt if demand were strong, coupled with the shortage issue in trucking, the commodity market pricing would be much higher. A drop in pricing of this level indicates that housing remains spotty, market-by-market, and overall continues to be subdued.

Keep in mind, the market could swing back in the other direction this month. So, be careful in pricing–protect yourself.

Have a wonderful Independence Day and please be safe!

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (romacfl.com), and he is a former President of the Southeast Mississippi Home Builders Association, and a past Associate Vice President of the Home Builders Association of Lake County.  To contact Magruder, email him at don.magruder@romaclumber.com.