March 2022 Whole House Commodity Index
By Don Magruder
The RoMac Whole House Commodity Index (Index) for mid-March 2022 hit yet another record, jumping 2.9 percent to $65,937. Additionally, the housing demand equation continues to overwhelm capacity and supply and may get worse as the last big blast of winter for most of the northern tier will probably end this week. However, if builders were hoping to get some clarity and certainty of these markets, over the last 30-days the markets have gone much cloudier. In fact, it is becoming downright scary.
Just consider these issues which were not even discussed just 30 days ago.
- A Russian invasion of Ukraine and the biting sanctions by the west which is disrupting supply channels in metals, lumber, and oil.
- A huge outbreak of COVID-19 in China’s Jilin Province and Shenzhen which are major manufacturing and exporting regions in China. These complete lockdowns will exacerbate current disrupted supply chains from China.
- Oil prices have gone from $92.07 per barrel to $109.33, and supply is squeezing the world economy.
- Certainty of Federal Reserve’s interest rate moves is in question due to all the current world events.
- Finally, what impact will this huge run up in gas prices do the retail consumer of building supplies for spring projects as discretionary income shrinks and projects continue to cost a lot more.
The American building supply chain continues to remain stressed and right now, there is no one who can predict where these markets will be in a few months which adds enormous pressure to those planning and building projects.
All we can do is take a snapshot right now with our Index, but the certainty in the future is just too elusive. Here are the major price movers for the month.
- Foundation wire mesh added 5.8 percent and rebar added 7.9 percent, as much of the world’s scrap metal moves through Ukraine. Real concerns are mounting for all metal-based supplies as that part of the world and China represent such a large producer. The freezing of Russian oligarchs’ assets could have serious implications especially in aluminum.
- 19/32 CDX declined 8.8 percent, but OSB sheathing continues to increase by adding 16.8 percent. Logs once being sent for OSB production are being used for higher priced panels. Oddly, 15/32” 4-ply CDX has jumped 15.0 percent because builders are using this plywood to pack 2×12 for headers.
- LVLs added 28.2 percent and Glulams jumped 10 percent as supply is almost non-existent due to shortages in raw materials and heavy demand.
- Spruce pricing was mixed. 2×6 spruce retreated 5.3 percent while 2×4 dimensional added 7.6 percent and 2×4 92 5/8 studs jumped 13.0 percent. Shortage in supply from Canada due to mill shutdowns, and shortages in railcars and trucking, are making things worse. One thing to note, Russia provides the world with a large percent of logs that are manufactured in Western Europe as European Spruce. There is a shoe which could drop in the next month or so.
- Pine dimensional lumber was up across the board. 2×4 pine added 8.5 percent, 2×6 increased 10.9 percent, but 2×12 wide-width pine was up 27.0 percent as buyers of LVLs moved to 2x12s packed with ½ CDX for headers.
- 4×4-8 treated posts were up 12.4 percent while 2×4 borate treated lumber added 8.1 percent.
- Roof truss pricing increased 8.3 percent on continued increases in lumber and labor. Manufacturing labor has soared over the last 6 months.
- Ancillary metal products increased, but the worst is probably yet to come.
- Pocket door frames jumped 9.9 percent on soaring metal track and rollers as well as soaring spruce pricing for 1by material. Lead times have gone out to more than 6 months for hardware which is keeping supply tight.
- Door pricing increased 2.0 percent for exteriors and on average 3 percent plus on interiors as moulding and jamb pricing continues to increase.
- Window pricing reduced 3.5 to 5.3 percent as announced increases were pulled back by manufacturers. This seems very temporary.
- A spring buy in PVC trim boards eased pricing down 8.0 percent.
Builders should be concerned about the oil pricing. Just about every manufacturer and distributor is contemplating or has announced fuel surcharges, plus trucking and logistics are a nightmare. The cost to have material delivered to your jobsite will go up in price at all levels.
Next, Russia and Ukraine supply a great deal of raw materials used in the building supply industry and the Russian invasion coupled with the China lockdowns, will create even tighter supply and higher pricing. Also, the demand for steel in the United States due to the infrastructure bill, and the necessity for steel across the world to build weapons of war, will keep steel and metal supplies tight.
The wildcard will be the demand equation. Initially, there is a good chance homebuilding will hold up, but many are growing concerned about the retail side. A dip in retail lumber and building material spending due to high gas prices could ease pressure on the homebuilding side if supply is not disrupted greatly, but at this point- who knows what the future will hold.
Hang on, protect yourself, and plan your projects in advance. Details in the market really do matter as uncertainty will persist and probably grow worse.
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.