By Don Magruder
The RoMac Building Supply Whole House Commodity Index for mid-April 2023 increased .7 percent to $49,749 despite the interest rate and banking crisis headwinds of the last 30 days. In my view, the banking crisis in March tapped the brakes in housing momentarily as the residential construction industry is overdependent on small and regional banks for financing. The fundamental housing shortage in America and Florida continues to exist and the stabilization of interest rates to a new normal by the Federal Reserve will probably entice housing-hungry buyers off the sidelines, if, there are no more shoes to drop in the banking industry.
Pricing and housing demand would have probably increased more if not for the banking crisis, and the housing starts along with new home sale numbers that increased in February support this notion. This tapping of the brakes over the last month has caused builders and real estate investors to slow play projects and investments as the memories of 2008 remain in their minds. The farther away we get from the banking issue and the uncertainty it brings, the chance housing demand will further strengthen.
Since December 2022, the Index is up 1.9 percent which would translate into about 7.6 percent for the yearly inflation rate in housing. Housing costs are not going down as many believe. Yes, this Index pricing is down from April 2022 (last year) by 15.4 percent, but most should view last spring as an anomaly- a once-in-a-decade occurrence. For this reason, builders need to be careful with cratering prices because if demand continues to improve, pricing will firm further.
Here are the notable price movers over the last 30 days.
Excess inventory in rebar and wire mesh along with continued demand in the infrastructure sector bolstered mesh pricing up by 35.7 percent and rebar added 18.2 percent.
The dimensional pine market was up on logging issues with weather and demand. 2x4 pine added 7.3 percent, 2x6 pine was up 2.3 percent, and wide-width 2x12 jumped 14.3 percent on price pressures in LVLs and undersupply.
Dimensional spruce was mixed as there was a flood of European wood hitting the markets. 2x4- 92 5/8 spruce studs gave back 1.7 percent while 2x4 dimensional spruce was flat with a .7 percent decline while 2x6 dimensional spruce added 8.4 percent.
OSB sheathing finally started moving up with a 16.2 percent increase - the price was too low for manufacturers and out of line with CDX which remained flat from the prior month.
Because of increases in pine lumber, truss pricing jumped 2.8 percent.
4x4-8 treated posts added 10.1 percent on improved demand while 2x4 Pine Treated Borate added 6.3 percent on higher pine pricing.
LVL pricing dropped 8.0 percent as competitiveness hit the market with better supply.
Wood moulding prices dropped as casing declined 9.5 percent while base gave back 12.5 percent. This market is choking on excess supply from over-ordering and long lead times from last year.
Vinyl soffit added 5.4 percent on continued cost increases.
Builders and people in the material supply chain, we are at the mercy of forces we cannot control like the Federal Reserve, banking system, and geopolitical system. While we can forecast and evaluate the next few months, a black swan event or economic problems from out of nowhere can completely upend our expectations. For this reason, I think many in the housing and construction industry will be a tad more cautious in investments and seek more guarantees. What we need more than anything right now is normal- peace and stability.
I expect pricing to continue to firm moderately as the last months have continued to pent up demand.
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.