August 2023 Whole House Commodity Report
By Don Magruder
The RoMac Building Supply Whole House Commodity Index for mid-August 2023 increased 2.3 percent to $50,527 as wood panel products (OSB and CDX plywood) continue to escalate in pricing and the overall economic construction environment continues to be pressured by a tight labor market and increasing wage inflation due to a lack of skilled labor and the new Florida immigration law. Over the month of July, many builders noted slower job site production across the state of Florida, and labor rates are escalating in all sectors of construction.
Here are the notable price movers over the last 30 days.
5/8 CDX pine plywood is up 11.2 percent while 7/16” OSB sheathing added 12.3 percent on tighter supply and good demand.
2x4 #2 pine was up 1.0 percent while higher grades advanced further. 2x6 pine was down 9.6 percent and 2x12 pine gave back 16.1 percent.
Spruce studs dropped 4.3 percent while 2x4 dimensional spruce printed down 8.2 percent and 2x6 retreated 12.9 percent.
Truss prices increased 18.2 percent on higher-priced specialty pine lumber and labor inflation over the first half of 2023.
House wrap increased by 3.2 percent.
4x4-8 treated posts dropped 8.4 percent while treated 2x4 added a little more than 1 percent.
Colonial casing dropped 5.3 percent on lower and plentiful import material.
The RoMac Whole House Commodity Index mirrors the Bureau of Labor Statistics’ Producer Price Index (PPI), number, as only wood commodity-driven items in construction products have decreased in pricing over the last year. Inflation in most over-building products sectors ranges from 2.0 in plumbing fixtures to 9.6 percent in concrete products.
Soaring labor and fixed costs in Florida will make it difficult for builders to find much relief in pricing. Labor costs will stay or go higher if the immigration issue continues to deteriorate. The full impact of the immigration issue is probably not felt due to the excessive heat over the last 30 days in the state. The other issue is fixed costs, especially related to insurance coverage. To say Florida is having a business insurance crisis is an understatement. Policyholders are seeing 25 percent plus increases on all insurance lines as the state has struggled to address the mitigation risks and tort issues.
Here is the current risk concern. Florida is surrounded by water temperatures in many areas well in the 90s and along The Keys in the 100s. The brunt of hurricane season is upon the state, and another bad year of hurricanes could exacerbate a terrible labor and insurance market, driving costs up even further on construction.
Builders - your main challenges are not the price or supply of materials - it is labor costs, availability, and the ability to buy affordable insurance. For this reason, the markets could change quickly, and builders should utilize price escalation clauses in their contracts. Over the next couple of months, the construction markets could see some real challenges.
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.