By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) for August 2023 increased 1.9 percent to $511.71 even though the lumber and sheathing parts of the Index went in opposite directions. With continued interest rate pressures, the dog days of summer, and builder sentiment nationally lowering, the market price directions will be driven by actual demand, which is uncertain at best. It is notable that August marks the second straight month of increases for the Wood Commodity Index.
The dimensional lumber portion of the Index declined 10.7 percent to $448.70 per thousand as the previous month’s price exuberance in lumber did not continue and builder moods soured. Only 2x4-16 treated added to the previous month’s pricing with a 2.5 percent increase while most dimensional spruce lumber and studs retreated $33 to $80 per thousand depending on length and width. 2x12 #2 pine gave back over $100 per thousand and demand failed to produce any price floor. Wood is plentiful and there seems to be little urgency from buyers.
The sheathing portion of the Index was very different as it increased 11.4 percent and both CDX pine and OSB sheathing added to its previous month’s price increase. Mill issues and the overall balance between supply and demand seems to keep pricing legs under these products. CDX pine increased from $45 to $70 per thousand while OSB sheathing added a straight $60 per thousand or almost $2 per sheet. While the momentum for price increases in sheathing has slowed over the last week, many producers are waiting and holding their breath as the country hits the heart of hurricane season. With the warm waters surrounding Florida, many believe the sheathing markets could look much different in 30 days.
The demand for housing remains, but the ability to build and find affordable housing persists as well as higher interest rates and Florida labor issues related to immigration which is slowing job site production. At the present time, the negative variables are outweighing the positive sentiment, and real demand will be needed to drive the market upward. Be careful about hurricane season- price could go up real quick.
The RoMac Wood Commodity Index is a weighted lumber and sheathing composite based on usage in Central Florida. By using wholesale pricing, the Index is a good indicator of the pricing direction for the next 30 days.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida, he is a former president of the Southeast Mississippi Home Builders Association and a past Associate Vice President of the Home Builders Association of Lake County.