November 2022 Whole House Commodity Index
By Don Magruder
The RoMac Whole House Commodity Index (Index) for mid-November 2022 declined 2.6 percent as commodity markets, even with another Florida hurricane, appeared to stabilize and flatten out. Unlike the last year or so, retreats in other building material areas outweighed the volatility of commodities. It appears the Federal Reserve is tightening, and interest rate increases are compressing housing demand and supply chain issues which is knocking out the froth and overexuberance in some areas.
A one-year comparison of the Index shows a 5.2 percent increase from last November, and last year, commodities were more expensive. This suggests significant core inflation in other building materials sectors.
Since mid-October, here are the notable price movers on the Index.
- Foundation rebar was down 13.1 percent on ample supply.
- CDX pine retreated 8.1 percent while OSB sheathing remained flat. The overall sheathing markets are flattening out even with the prospects of increased supply.
- 2×4 yellow pine dropped 9.7 percent but 2×6 pine was up 8.6 percent while 2×12 pine added 8.6 percent. This indicates these markets are stabilized and probably entering a smaller volatility range.
- Spruce studs were down 2.3 percent while spruce 2×4 dimensional was flat just down .7 percent and 2×6 spruce added 6.0 percent. Once again- more stability.
- 4×4 treated posts were down 2.8 percent while 2×4 treated gave back 10.7 percent.
- The drop in 2×4 pine resulted in a 9.1 percent drop in truss pricing.
- Heavier inventories, compressed demands, and slow hurricane recovery resulted in a 4.2 to 6.8 percent retreat in shingle pricing.
- Colonial casing dropped 4.1 percent on lower costs of goods finally moving in the supply chain.
- Vinyl soffit and siding retreated on slower demand retreating 16.5 to 22.6 percent.
As 2022 comes to an end, supply chain inventory lines have freed up significantly and many supplies are sitting on higher inventories. This will probably create some opportunities for lower pricing in the short term as many will work hard to turn this inventory into cash. Into next year, better inventory management along with little chance that core inflation issues like wages and fuel costs will subside, suggests to me that the overall markets will be higher than the current levels.
The biggest hope by many in the construction sector is that 2023 will usher in less volatility and better reliance on supply chains, which is possible. At some point, the housing market will rebound quickly as the fundamental housing market shortage in America, and especially in Florida, is far from being resolved. Builders should be wary about bottoming pricing on future projects.
To all of the readers, it is my hope that you have a blessed and happy Thanksgiving with too much of everything good.
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. For great videos and Don’s weekly column, go to www.AroundTheHouse.Tv to subscribe to our YouTube channel and weekly updates.
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