By Don Magruder
Since our mid-December update to the RoMac Building Supply Whole House Commodity Index (Index), we’ve gone through a couple of holidays, a lot of rain in Florida, and brutally cold weather in the rest of the country, but despite all the reasons why wholesale prices should have gone down, this month’s report is up 2.0 percent to $51,198. This is on top of an increase in December.
Considering the weakness in the overall national housing market in 2023, it is significant the Index is up 5.3 percent since last January. To have this much inflation in a down market illustrates how the real costs are affecting companies in the industry.
So, what is going on?
First, the cost of doing business and labor is not going down for anyone. Labor costs continue to escalate across the country as recent union contracts indicate, and the cost of equipment, property, and insurance shows no signs of price abating- especially in Florida.
The wood commodity markets continue to show strength as more mill closures and curtailments are tightening supply, plus there is an expectation the worst of the housing market is behind the country.
Finally, despite the howls from many, the economy is actually very strong, and inflation is easing.
If the housing demand equation continues to improve through 2024, there is little doubt cost of materials and labor will be higher in 2024, and while no one at this time is predicting the disruptions of 2022-21, there is a chance lead times could go out later this spring and summer.
There is a chance this Index could be at the lowest point in the year as many manufacturers are announcing 3 to 5 percent price increases in the first quarter, and some like drywall, are wanting huge run-ups in pricing. Wood pricing and scrap steel pricing have been rising, so builders should be careful with long-term bids.
Here are the primary price movers on the Index since mid-December.
Rebar prices dropped 9.5 percent on wholesalers unloading inventories. With scrap pricing going up, expect these numbers to turn back up later in the spring.
Concrete in the last quarter increased by 14.8 percent while blocks added 8.8 to 12.9 percent.
CDX pine plywood increased by 1.6 percent while OSB sheathing dropped by 5.9 percent.
Spruce studs increased by 2.0 percent with 2x4 dimensional spruce adding 5.0 percent. 2x6 spruce jumped 8.7 percent.
Pine dimensional spruce was mixed based on the width. 2x4 pine was flat, 2x6 pine dropped 1.1 percent while 2x12 pine jumped 8.7 percent. As the spring-treated wood season begins, I would expect more pressure on pine pricing.
Trusses added 1.4 percent on higher prices, specialty pine pricing.
Rolled house wrap gave back 5.7 percent on better availability and increased competition.
Concrete lap siding increased 5.1 percent on higher raw material and manufacturing costs.
Just one thing to consider. Since the great supply chain disruptions of a couple of years ago, the supply chain, due to the housing downturn, expanded very little, and any boost in business due to housing activity will expose these same weaknesses. Builders with new projects later in the spring and summer should prepare earlier, confirm supply, and build-in cost increases. The markets could be more challenging than last year.
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.
Stay up to date with the latest commodity trends in the building supply industry by subscribing to RoMac News. Click the button to subscribe today!