May 2016 Whole House Commodity Index
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for May increased 2.8% to a new high of $31,002.18, primarily on the strength of the lumber and sheathing market.
The huge forest fire in Alberta, Canada, which has grown larger than a half million acres, is limiting wood production in one the world’s most important regions. The fire has destroyed more than 2,400 homes and the Canadian government tallies the total damage from the fire at almost five billion dollars. This catastrophic event has had a huge impact on the lumber markets and is one of the primary drivers of the spruce market.
The following are some notable price movers in the Index since last month:
Wire foundation mesh was up 5.8% and rebar added 1.6%.
CDX pine plywood was up 1.1% while OSB sheathing pumped up 5.3%.
2×4 spruce added 3.1% while 2×6 spruce increased 1.2%.
Spruce studs were up 6.2%.
Pine 2×6 pricing was up 1.2% while 2×12 wide width pine added 1.5%.
Trusses were up 11.6% as higher cost pine filtered through. Increased labor costs continue to pressure pricing.
Windows added 5.0% as manufacturers reacted to higher demand.
If not for the fire, would wood-related prices have increased based on the actual performance of the housing market? With last month’s starts and permits down, it is unclear if housing momentum is building. As the fire is contained and extinguished the challenge will be whether the markets can hold onto these gains. I think this summer could be a volatile and bumpy time.
Keep a close eye on the markets and don’t get caught in a long-term bid without some protection. As we head into hurricane season it may be smart to be a little cautious.
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.