June 2018 Whole House Commodity Index

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by Don Magruder, CEO of RoMac Building Supply

The RoMac Lumber & Supply, Inc. Whole House Commodity Index (Index) for June 2018 set another record high at $36,436.94 as material costs increased at an even faster pace.  The Index added 2.4 percent since mid-May—almost doubling the rate of increase in the prior month. Until this week, pricing has been moving upward almost unabated; however, some cracks in prices has developed over the last 7 to 10 days.  Market professionals are trying to determine if this is a breather or the first small signs of a retreat.

From January 15 to June 15, 2018, the Index increased $3,327.85 or 10.1 percent.  It is important to note this does not include the new United States tariff policy or price increases in mechanical, electrical or plumbing, which have been greatly impacted by labor increases.

The Index represents the structural material to build a 2,200-square foot home, and the notable price movers in the Index over the last 30 days were:

  • Foundation metal continues to increase because of tariffs. Rebar was up 1.7 percent while rolled mesh added 3.3 percent.
  • Rolled foundation poly film added 13.1 percent.
  • CDX pine plywood was up 11.3 percent while OSB sheathing added 10.5 percent.  The sheathing markets remain strong as trucking problems persist and imports of CDX plywood are reduced.
  • Trusses were up 2.1 percent on increased lumber and metal plate costs directly impacted by the steel tariffs.
  • Dimensional spruce lumber was mixed as buyers started to question levels.  2×4 spruce studs were up 4.9 percent and 2×4 spruce increased 2.7 percent, while 2×6 spruce dropped 1.7 percent.
  • Wide-width pine dimensional pushed that market with 2×12 pine adding 3.1 percent and 2×6 pine pushing up 10.9 percent.  2×4 pine retreated 3.5 percent on lagging sales.
  • 4×4 treated posts added 1.6 percent.
  • Engineered I-joist beams added 9.6 percent on market increases in OSB.
  • Roofing shingles added another 5.9 percent as roofing manufacturers are taking advantage of a larger backlog and entry into hurricane season.
  • Interior door units were up 1.0 percent on high slab prices and bifold doors added 7.1 percent.
  • I have also been advised that concrete prices are poised to join the price increase party possibly as early as July.

Who can eat a 10.1 percent increase in a five-month period?  Builders who are already strapped with labor issues and dwindling margins?  A consumer who has incurred record debt? Or, suppliers that are still reeling from the Great Recession?  The answer is simple—no one can. Housing demand will become victim if prices do not settle down and begin to drop.  The line between affordability and demand might have already been crossed. If so, expect these markets to retreat. If not, they could have a few more months of legs.

A weak hurricane season would be the best thing for pushing these markets downward.  Keep a close eye on the commodity markets, things could get real bumpy the next few months.  If demand eases, the pricing floor could collapse very quickly.

A Price Adjustment Clause is a smart thing to have in your contracts.  Ro-Mac Lumber & Supply, Inc. has drafted a clause that is tied to this Index.  If you would like to obtain a free copy of Ro-Mac’s Price Adjustment Clause, email Rebecca Ballash at Rebecca.Ballash@RomacLumber.com.  

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 www.romaclumber.com to sign-up for the Index and other free market reports.  To sign-up for this information via email, contact Rebecca Ballash at Rebecca.Ballash@RomacLumber.com.