By Don Magruder
Just like the overall economy, inflation cooled significantly in November, in a year-over-year comparison. The RoMac Building Supply Whole House Commodity Index for mid-November 2023 settled at $50,147 which is down 2.1 percent from October and up only .5 percent from last November. If you study our graph tracking the Index, you will determine the overall cost of materials for a home has remained somewhat steady for the last 12 months. There is no argument that higher interest rates, higher development costs, and government fees, as well as home appreciation, have dampened the markets.
Here are the major price movers on our Index since last month.
Foundation wire mesh dropped 3.7 percent while rebar retreated 2.9 percent on slower demand worldwide.
CDX pine plywood dropped 9.7 percent while OSB sheathing firmed up, adding 10.7 percent. In my view, this is a balancing of the market with these two items.
Dimensional 2x4 and 2x6 spruce jumped 5.4 to 5.6 percent in price on better demand and controlled supply.
Spruce studs retreated 4.8 percent as mills searched for buyers.
The pine markets capitulated in price as mills outpaced the market with production. 2x4 pine dropped 15.1 percent, 2x6 gave back 20.0 percent and 2x12 pine settled 13.7 percent lower. Based on historic numbers, the pine markets are closing in on a bottom, and with the spring season approaching with treaters entering the market, I expect pricing to reverse in the next month or so.
The capitulation in pine pricing created a 5.3 percent decline in truss pricing.
2x4 borate pine dropped 12.9 percent while 4x4 treated added 4.3 percent.
Architectural shingles retreated 4.5 percent on slower demand and a slow hurricane season.
Drywall gave back 3.7 percent on a more aggressive sales tone by manufacturers.
Builders should expect pricing to remain unimpressive and softer throughout the rest of 2023 as the holidays and winter weather have their effects on the housing market.
We have yet to see a capitulation in labor costs and fixed costs such as energy, insurance, and taxes which have continued to escalate. For those reasons, as well as a belief the housing market has probably already hit bottom with slight improvements going forward monthly, builders should expect a wave of price increases in non-wood building material items after the first of the year. Plus, if pricing remains low in wood commodities, there is an expectation of accelerating mill curtailments and closures over the next few months.
While I don’t expect runaway inflation in 2024, my bet is this Index will probably be 2-4 percent higher next November.
I want to thank you for reading the monthly RoMac Building Supply Whole House Commodity Index. If you find this information useful, please feel free to share it with others. You can also sign up for free and receive it monthly.
Finally, it is our hope and prayer that everyone has a blessed and safe Thanksgiving with an abundance of everything good.
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.