May 2023 Lumber & Commodity Report
By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) increased for the second straight month in May as builders begin to stir with more demand. The Index increased 4.8 percent over the last 30 days to $430.76 per thousand. A colder spring along with the uncertainty of the banking crisis and higher interest rates are giving way to the reality of a housing shortage in Florida. Sentiment is picking up with many builders and it does appear momentum has started to build in the second quarter.
The dimensional portion of the Wood Commodity Index added 1.8 percent to $442.50 as 2x12 wide-width pine continued to escalate in pricing due to demand and limited supply. 2x12 pine was up $85 to $100 per thousand while narrow-width 2x4 pine was off 2.6 percent. Dimensional spruce was mixed depending on size and availability. Longer length 2x4s and 2x6 spruce dropped by low single-digit percent while shorter 2x4 spruce added a solid 3 percent. The fluctuation in these prices indicates that inventory levels are working down.
The sheathing side of the Wood Index has been steady for the last two months - no gains in CDX pine plywood and a $40 dollar per thousand increase in OSB sheathing pricing. There is a 7.3 percent increase in the Sheathing Index or $28.82 per thousand. The average price on a sheet of OSB went up $1.20 in price over the last 30 days. Until housing demand increases, expect this pattern to continue.
The debt ceiling issue, higher interest rates, and remnants of the banking crisis pose continued headwinds for housing over the next 30-45 days, but if these issues can be navigated with no further problems, housing is poised to start a modest gain this summer. If the politicians fail to resolve these issues, the summer home selling season will probably bog down in uncertainty. This next month will determine the market direction for the summer.
Builders should monitor pricing with their suppliers, but more importantly, keep a close eye on lending markets to see if credit availability starts reacting negatively to the shenanigans in Washington D.C.
The RoMac Wood Commodity Index is a weighted lumber and sheathing composite based on usage in Central Florida. By using wholesale pricing, the Index is a good indicator of the pricing direction for the next 30 days.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida, he is a former president of the Southeast Mississippi Home Builders Association and a past Associate Vice President of the Home Builders Association of Lake County.