November 2020 Whole House Commodity Index
The RoMac Building Supply Whole House Commodity Index (Index) for mid-November 2020 dropped 7.4 percent to $38,766 as wood commodities continued to moderate in price. Although prices have retreated to late summer pricing, the Index is 17.0 percent higher than November 2019 and has its fourth highest number in its 15-year history.
Many believe commodity prices would have been off more by mid-November. However, continued supply, demand, and COVID-19 issues have not put traders at ease. While the decline in wood commodities are significant, pricing continues to be at historical highs with many buyers now conceding that pre-pandemic pricing levels may be a long way off. Some markets like dimensional spruce have hit a pricing floor and have rebounded somewhat lately. Plus, OSB sheathing has refused to concede large price decreases making those numbers very resilient.
Another sign that pricing may be establishing a higher baseline level is the lumber futures market. Pricing from November to February is trading at a tighter, manageable level with no indication that a huge market decline is imminent. As is the case for 2020, the COVID-19 pandemic and its effect on supply and demand will be the main market driver through spring 2021.
Here are the notable price movers over the last 30 days:
- Foundation wire mesh gave back 4.1 percent on easing supply.
- CDX pine plywood dropped 12.4 percent while OSB sheathing decreased 5.1 percent. OSB manufacturers have been trying to convince everyone they are having issues and that prices would remain firm, and the numbers suggest they may be right. Although decreases occurred in the last couple of weeks, time will tell if this is a trend.
- RoMac Building Supply switched to synthetic felt in the Index because of the new Building Codes being implemented in Florida. This more than doubles the price and adds a couple hundred dollars to the cost of the house.
- Pine was down across the board; however, pricing remains high. 2×4 was down 45.5 percent, 2×12 dropped 18.8 percent, and 2×6 gave back 23.8 percent.
- Although dimensional spruce dropped for the month, it has firmed up over the last couple of weeks. 2×4 was down 17.3 percent, 2×6 spruce came off 23.2 percent, and 2×4 studs were down 21.8 percent.
- 2×4 borate lumber was down 43.0 percent and 4×4-8 treated dropped 31.7 percent.
- Pocket frames were up 4.8 percent on high spruce and labor costs.
- Drywall pricing increased in price 2.5 to 4.6 percent on manufacturers resetting pricing.
- Windows and patio doors added 7.0 to 8.0 percent on increased cost for vinyl extrusion.
The markets are moving in many ways and making it mind-numbing for builders who are trying to cost projects out correctly.
Let me put into perspective the pricing of key wood commodities with these decreases compared to their price from November 2019, just one year ago.
- CDX pine is up $4.58 sheet.
- OSB sheathing is up $14.88 sheet.
- 2×4- 92 5/8 SPF Western Studs are up $1.49 each.
- 2×4-16 #2 spruce is up $2.81 each.
- 2×4-16 #2 pine is up $1.64 each.
These examples show just how out of whack the markets remain even with the declines in pricing this month. Plus, higher grade lumber like #1 and MSR remains higher priced and harder to find.
What can you expect? Expect the COVID-19 pandemic to worsen because America is doing a poor job mitigating the risk. I expect continued shutdowns at all levels because of the virus. Pricing will fluctuate but remain high, and we could see spot shortages by spring.
Stability will come to the markets when the Coronavirus is resolved by either good public healthcare or a vaccine. Over the next three to four months, builders should price projects on the high side as volatility could catch many short again. It is imperative that you have a price escalation clause in your contracts. We offer for free a clause linked to this Index and it can be obtained by contacting Rebecca Ballash through our Contact Us page.
Most importantly, Happy Thanksgiving to you and your family! Please be careful because COVID-19 is raging, and we are too close to the end to lose so many people. Wear your mask, practice social distance, and wash your hands.
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. 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 through our Contact Us 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.