March 2016 Lumber & Commodity Report

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LUMBER AND COMMODITY REPORT – March 2016

by Don Magruder, CEO of RoMac Building Supply

In last month’s report, I said the next 30-45 days would probably give a better indication of the housing market’s direction for the spring.  It appears the housing market is starting to show some life, based on increases in the Wood Commodity Index (Index). Over the last 30 days, the Index is up 5.2% to $299.33 per thousand, with all items but one adding to its wholesale price from just a month ago. Whether this momentum in the markets can be carried over has yet to be determined.

The dimensional lumber portion of the Index increased 7.8% as double digit increases in spruce and wide-width pine pushed prices forward. The overall mood of the market was up as the first signs of a warm spring were felt throughout the country.  2×4-16 #2 spruce was up13.9% while 2×12-16 #2 pine added 8.3%, with spruce studs only adding in the single digits.

The sheathing portion of the Index increased 3.1% as OSB sheathing only added about 1.0% while CDX pine was up on average 4.0%.  This lack of price enthusiasm could indicate that the recent price increases in lumber could just be a seasonal fluctuation instead of a real market adjustment.  One huge point is the upward direction of both CDX and OSB shows the market pricing is probably congruent in its values.  Last year, those prices generally moved in opposite directions.

The housing market needs continued improvement to prop up prices and build momentum.  I am not sure the market has another 5.0% increase in itself for the next 30 days, but it needs it to build on momentum.

Drywall manufacturers are announcing a 10.0%-15.0% increase as of April 1, 2016.  A real sign of housing strength will be if this increase remains in place until mid-summer.  Rising prices is a great sign for most builders if they prepare by properly bidding or utilizing a price escalation clause in their contracts.

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 past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at don.magruder@romaclumber.com.