February 2023 Whole House Commodity Report
By Don Magruder
After two months of stabilized pricing and 8 months of decline, the RoMac Whole House Commodity Index (Index) increased in pricing for mid-February by 1.7 percent to $49,444. One of the last sentences I wrote in January’s Index report was “I could be wrong, but I think January 2023 is probably the bottom of the market for this year,” and I am more convinced now, that this is true. In fact, I dare say, there is a good chance that we have already seen the worst of the housing slowdown in response to the increased interest rate environment, and from here forward, expectations are that housing will continue to improve. The fundamentals of housing remain good in that there is an overall shortage of available housing units and especially here in Florida, the population continues to grow.
It is becoming more apparent the wood commodity mills are making a stand at pricing levels due to increased labor and fixed costs along with continued issues with trucking and equipment. All wood-related commodities in the last 30 days increased in price and some by significant amounts. As the winter eases in America over the next month, expect demand to increase further and this should continue to pressure price and supply. While at this time no one is predicting a huge runup in pricing compared to last year, there is plenty of room for significant inflation.
The following are the notable price movers over the last 30 days.
Foundation material prices eased on better supply. Poly film was down 12.5 percent, wire mesh dropped 13.6 percent, rebar was down 5.8 percent, and rod chairs that a year ago were non-existent dropped 18.2 percent. As winter eases and the American infrastructure program cranks up more nationally, you could see these items reverse course.
5/8 pine CDX plywood increased by 4.3 percent while OSB sheathing added 10.1 percent. Reports from some OSB mills indicated lead times are stretching and availability will become a little tighter.
Dimensional spruce was up with 2x4s adding 12.5 percent and 2x6s going up 12.0 percent. Spruce studs added 20.1 percent on mill closures and curtailments.
Dimensional pine was up as well with 2x4s adding a whopping 24.7 percent, 2x6s increasing 10.5 percent and 2x12s jumping 14.7 percent. Heavy rains in the south are hampering logging and this could be a bigger issue sooner than later.
Trusses increased 3.7 percent on higher lumber costs.
LVLs settled in prices with I-joist dropping 19.3 percent on great availability.
Insulation increased 12.9 percent on wall batts, and 9.0 percent on ceiling batts as supply remains restricted and increasing demand in commercial and multi-family.
Drywall panels increased by almost 2 percent as manufacturers struggled to find fair pricing in a high-demand environment. They wanted more but hit a wall of resistance that may be breached if demand indeed cranks up in the spring.
Casing pricing dropped 10.6 percent while wood base pricing declined 17.2 percent. Long lead times and a glut of containers on shore have oversupplied the market.
Garage Door openers increased 6.1 percent on increased labor and fixed costs.
Concrete lap siding added 7.0 percent based on yearly increases and increased costs for cement.
PVC wood trim dropped 13.7 percent on early-year buys and a more aggressive sales tone from manufacturers.
The latest United States unemployment report continues to show low unemployment rates and higher wages which will continue to pressure companies to increase pricing. This is really felt at job site levels. Plus, trucking is a mess as equipment and spare parts remain hard to find, and the seasonal increase in trucking from agriculture is about to crank up in Florida.
The are no signs, at this point, indicating that housing is expected to decline further, and in fact, reports from across the country are showing good signs of activity. A friend who has his finger on the national supply market said it this way, “Everyone thought it was going to be worse than it was, and now most are cautiously optimistic about the upcoming year.” There is a good chance the housing slowdown is behind us and the markets could heat up quicker than most think because the embers of demand remain hot. Builders, protect yourself on long-term pricing.
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.