October 2019 RoMac Whole House Commodity Index

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October 2019 Whole House Graph

The RoMac Building Supply Whole House Commodity Index rose $28.54 or 0.1 percent from September to October 2019. Despite the extremely minor increase, the Index was not good news for long-term pricing. The retreat in OSB pricing was significant and the downward trend in lumber has begun. As hurricane season wanes, winter draws closer, and the political upheaval in Washington, D.C. continues, there are few factors pointing toward higher pricing. If not for an increase in truss labor and delayed commodity pricing, the Index would have decreased. Manufacturers are signaling possible declines in pricing and drywall companies have begun retreating on recently added increases. Expect others to follow, especially if there is a cooling down of the trade war.

The other point to keep in mind is that labor pressures and prices may ease in the third and fourth quarters. This year marks the first one in three years that Florida or the east coast was not directly impacted by a major hurricane. Three years of labor being pulled to debris gathering and roofing companies is over and there will be many who need work this winter. There is a chance you could see labor availability and rates moderate as a sense of normalcy returns to Florida during the third and fourth quarters.

The following are the notable price movers in the Index over the last 30 days:

  • 5/8 CDX pine plywood fell 2.3% while OSB sheathing dropped 12.8%. OSB pricing is at or near recessionary pricing.
  • 2×4 spruce dropped 2.0% while 2×6 added 0.2%. Even with all the Canadian spruce curtailments, the floor on spruce pricing seems to be shifting.
  • Pine pricing was down with 2×4 down 1.0%, 2×6 down 9.9%, and 2×12 down12.6%.
  • Roof trusses were up 3.1% on higher labor costs and pre-bought pine. Expect these prices to go down as inventories are worked through.
  • 4×4-8 treated lumber was down 6.3%.
  • Base moulding was up 8.3% on increased overseas pricing.
  • Drywall was down an average of 4.0% on a couple of the most used items.

The market is showing no appetite to increase pricing.

Although new home sales and housing starts have improved in the last month, one month does not make a trend. Over the last few years, the housing market has been unable to sustain positive numbers for a quarter. Given the drops in the commodity markets, it appears the overall housing and construction picture remains unimpressive.

Pricing should continue to drift downward with spikes in certain items, which may spot availability issues—nothing drastic and more of a sense of what is available. Builders should monitor pricing and reprice bids from several months ago. Now is not the time to buy a stack of lumber and leave it on the jobsite. I see huge multi-family projects with mounds of wood and plywood still sitting on them from several months ago, which adds up to wasted dollars from damage, weather, and a declining market. Historically, mid-February is typically when pricing rebounds after wintertime, so projects in March 2020 should have some pricing protection.

Cash is king” and buy it when you need it.

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 at rebecca.ballash@romacfl.com. For great videos and Don’s weekly column, go to www.AroundTheHouse.Tv to subscribe to our YouTube channel and weekly updates.