November 2016 Whole House Commodity Index

November 2016 Whole House Graph

WHOLE HOUSE COMMODITY INDEX – November 2016

by Don Magruder, CEO of RoMac Building Supply

The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for November 2016 declined 0.7 percent to $30,889.33, as the markets tried to digest the future of housing in light of the surprising presidential election results.  A stubbornly inconsistent housing market coupled with a fizzle in hurricane season has given few manufacturers and mills an opportunity to lift prices.  It appears the markets may be starting the first stage of their winter hibernation.

Only two items in the Index increased in price—rebar was up 1.8 percent while 4×4-8 treated posts added 5.8 percent.  All other items dropped in cost at the wholesale level.  All spruce lumber was down 2.5-3.0 percent while pine lumber gave back more, with decreases ranging from 5.6-7.1 percent.  CDX pine plywood retreated 6.6 percent, with OSB sheathing handing back 3.5 percent.  The remaining items in the Index remained flat.

If anyone tells you what is going to happen next year in housing, don’t believe them—just ask President Hillary Clinton.  Here are a few things to watch as President-elect Donald Trump starts implementing his programs.

  • A huge increase in infrastructure spending will require the government to borrow more.  The days of 3.5 percent interest rates are probably gone.  Plus it could be very inflationary for materials.
  • If he implements his trade policies, expect tariffs to fly in all directions.  Pricing for wood and steel could become very volatile.
  • If he builds a wall and deports millions of Hispanics, the bad labor situation could become much worse.

There is little doubt about it, uncertainty is at play in the markets.  Things could get really good or really bad, depending on how all of these things shake out.  People in the construction industry should weigh their risk and exposure until a clear direction has been charted by the next administration.

Have a wonderful Thanksgiving holiday and be sure to count your blessings one by one.

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 romacfl.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.