May 2021 Whole House Commodity Index
The RoMac Building Supply Whole House Commodity Index (Index) for May 2021 jumped to yet another record high at $56,752, or a whopping 8.5 percent increase. The demand equation, labor shortages, COVID-19 delays and continued trade woes are combining to heat pricing to unimaginable levels. At what point does the builder and consumer cry Uncle or does demand levels dictate continued strength in the markets?
The increases over the last year have been unmerciful to builders and consumers. Since May 2020 to now, the Whole House Commodity Index has increased 65.8 percent, which is a weighted percent that reflects a real increase to build a 2,200 square foot home.
It is simply demand outstripping supply and the manufacturing pieces in America never recovering from the Great Recession; and the trade chaos of the last 4 years has just made the situation worse. America is no longer the premier trade partner of the world and its exit from trade deals has left huge supply gaps. It is understandable that people want to move jobs back to America, but you’d better have a 5 to 10 year strategy of ramping up manufacturing and you must prepare the American people for having to pay a lot more for items because of American labor and operating costs.
What we may be seeing in the United States building material sector is the first glimpse of the high cost of shunning the world in trade. In a recent earnings call, West Fraser, a major producer of lumber for North America pointed out that current sawmill capacity for North America is about 1.5 million United States housing starts, plus for every 100,000 housing starts there needs to be 10 new sawmills put online. If housing starts were to balloon to historic levels based on population growth, North America is probably short 50 to 70 sawmills. With labor, equipment, and log shortages, it would almost be impossible to crank up 50 to 70 sawmills in a reasonable time.
Additionally, lead times on windows are expanding out months in some cases and good luck in getting containers from overseas into port timely. Finding specialty studs are almost impossible and special-order doors are continuing to be hard to find. To say there is supply chain disruption is an understatement.
Here are the notable price movers on the Index over the last 30 days.
- Rebar increased 5.2 percent on higher import costs.
- CDX Pine Plywood jumped 14.8 percent of $7.04 per sheet. Retail prices for 5/8 CDX is well over $60 per sheet.
- 7/16” OSB jumped 15.1 percent or an additional $4.64 per sheet in one month. OSB is heading over the $40 per sheet level.
- Yellow pine dimensional has shot up price this month. 2×4 is up 24.7 percent, 2×6 added 46.8 percent and 2×12 pine increased 17.2 percent. A 2×6-16 pine board jumped by almost $7 per board.
- Trusses increased 4.5 percent with the news that metal plates are being placed on allocation and you may have to have carpenters stick frame roofs instead of use trusses. This week, our company has received multiple calls to provide hand framing for roofs.
- 2×4-92 5/8 spruce studs are up 31.8 percent and its sell price is almost $10 per stick.
- 2×4 spruce added 33.6 percent and 2×6 spruce jumped 33.7 percent. These jumps are unimaginable on the high prices from last month.
- 2×4 treated lumber added 20.6 percent while 4×4-8 treated jumped 9.5 percent.
- ¾ poly iso board is up 28.9 percent on raw material shortages and short supply.
- Pocket frames increased 6.6 percent on increased lumber costs.
- Rolled insulation increased 10 percent on limited supply and higher raw material costs.
- Roof metal added almost 15 percent on higher metal and aluminum costs.
- Colonial casing jumped 14.3 percent and base added 16.2 percent with persistent short supply on several profiles.
- Moisture tile backer increased 7.2 percent.
This month, once again, there is a long list of increases with additional announced increases for early summer including drywall, roofing, doors and windows.
You can continue to expect some volatility and there could be ups and downs, but long-term, I see little ability for these high prices and material supply issues to resolve themselves quickly. Builders need to be detailed in planning jobs, prepare for long lead times, avoid buying specials and customs, and get ahead of price increases.
It is imperative that you have a Price Adjustment Clause in your contracts to protect yourself regarding pricing. RoMac Building Supply offers, for free, a Price Adjustment Clause for Contract, which is linked to this Index. It can be obtained by contacting Rebecca Ballash through our contact page.
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. If you would like to receive this free market report, along with others, please contact Rebecca Ballash through our contact page. For great videos and Don’s weekly column, go to the Around The House site to subscribe to our YouTube channel and weekly updates.