By Don Magruder
The final RoMac Building Supply Whole House Commodity Index for 2023 is up in cost with an increase of .1 percent to $50,179. While the increase may seem sedate, if you look inside the numbers, you see a market poised for increases after the first of the year. Despite being just a couple of weeks from Christmas, most wood commodities printed up in price, and it took a lag in truss pricing from previous pine pricing declines, and a drop in moulding pricing to keep the Index from not escalating further.
Here are the notable price movers over the last 30 days.
CDX pine plywood added 2.5 percent while OSB sheathing increased 8.3 percent as mills attempted to manage supply.
Dimensional spruce, including studs, 2x4, and 2x4 was up from 1.5 to 3.5 percent as lower ground inventories kept a steady stream to mills.
Pine pricing over the last week or two has reversed course by adding 4.5 to 16.9 percent. Wide-width 2x12 pine added 4.5 percent while 2x4 pine jumped 9.8 percent and 2x6 popped up in price by 16.9 percent.
Truss pricing declined 2.8 percent on lower-priced inventories which have yet to be replenished by higher-priced wood available in December. This is just a lag in pricing from the market.
Wood moulding pricing in base and casing gave back 11.1 percent as manufacturers searched for more customers.
The rest of the Index was flat from November.
After the first of the year, I expect the price increases to flood the boxes of builders and dealers.
Concrete and block manufacturers have announced tentative plans to increase pricing as well as door manufacturers, plus scrap steel in the last week has soared over $60 per ton. I expect many non-commodity manufacturers to implement increases next year as the labor burdens and wages continue to hamper most businesses, plus the overall fixed costs of machinery, land, facilities, and especially insurance are showing no signs of abating in price. While inflation of the last few years is unlikely, there is a reasonable chance there will be 3 to 5 percent inflation across the board.
Understand, the new contracts by the autoworkers and UPS are resetting wage rates that will be impossible to ignore in a terribly tight market. Plus, Florida’s insurance market on all levels is in dire straits and the willingness to reform further in Tallahassee is not encouraging. Builders will need to monitor costs and not use today’s numbers for projects starting later in the spring.
Finally, if the Federal Reserve does cut rates later in 2024, the markets could tighten up real fast and pricing, along with supply, could get pinched. The fundamentals of a year ago still remain in place.
On behalf of the entire team at RoMac Building Supply, thank you for your support and we hope that you and your team and family have a blessed and Merry Christmas as well as a Happy New Year. Talk to you in January!
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.