January 2023 Whole House Commodity Report
By Don Magruder
The RoMac Whole House Commodity Index (Index) for mid-January may have cemented a bottom in the market for the year as wood commodity prices have now capitulated prior to pre-pandemic levels and the first week of January has been littered with announcements of mill closures and curtailments. The Index since mid-December dropped a meager .4 percent to $48,633, and this is the lowest level since November 2021. One big factor which led to any decreases since December is a modest reduction in freight rates as trucking has become a little easier.
The deflation in wood commodities is stunning and below are some key items and the actual cost declines since last January.
19/32” CDX is down $25.45 per sheet
2×4-16 #2 Pine is down $11.76 per board
2×4- 92 5/8 #2 SPF Studs are down $3.86 per stick
7/16” OSB is down $17.66 per sheet
Roof Trusses for our House are down $6,281
All other building supply items are up as labor, trucking, and raw materials in those sectors have not capitulated like wood. One notable increase is the cost of concrete. It is up $28.24 per yard and with the American Infrastructure Plan taking hold with new roads and government projects, concrete could be an issue in 2023.
Here are the price movers on our Index since mid-December.
Concrete is up 7.0 percent with blocks adding 6.2 percent.
CDX is down .9 percent while OSB gave back 7.0 percent.
In pine dimensional lumber, 2×4’s dropped 7.2 percent, 2×6’s declined 14.2 percent, and 2×12’s gave back 8.8 percent.
Spruce studs dropped 1.0 percent while dimensional SPF #2 declined 2.0 percent and 2×6 was down 1.2 percent.
Roof trusses for our house dropped 5.7 percent.
4×4-8 treated was down 3.6 percent and 2×4 treated was off by 4.3 percent.
Base moulding added 5.5 percent to increased operational costs.
All other pricing remained steady with the drywall manufacturers announcing huge increases for January and February.
Unemployment remains historically low, and labor remains tight. While fuel prices have dropped, they remain elevated, and available trucking is better but still remains stressed as truck drivers are still in high demand. The chances of a recession in 2023 are fading as the Federal Reserve indicates interest rate hikes will slow and the latest inflation reports are encouraging, plus as employment remains robust with stronger labor rates, it is hard to see a recession with these types of positive employment numbers.
More importantly, homebuyers and builders are starting to accept mortgage rates that are still at historically modest levels. For the state of Florida, the population will fuel demand as the Census Bureau reports in the year ending July 2022, the state of Florida was adding over 8,000 new residents per week- that is a new town every month.
Builders need to be cautious about future pricing. If demand improves as the winter wanes which it should and the wood commodity markets are at pre-pandemic lows, the pricing today will not be the pricing you will pay in the spring. In fact, builders should ensure price escalation clauses are in all contracts. Understand, at this point, the market is at the bottom and the only trajectory is up.
I could be wrong, but I think January 2023 is probably the bottom of the market for this year. We will see.
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.