By Don Magruder
The RoMac Building Supply Whole House Commodity Index (Index) for October 2024 increased .04 percent to $50,554 from last month despite two major hurricanes striking Florida and the United States. Oddly enough, hurricanes will hurt housing production as builders stop jobs and labor is scattered in preparation for a hurricane and for the immediate aftermath and cleanup. The real push on the markets generally begins several weeks after the hurricane’s impact.
Additionally, since last month’s update, the Federal Reserve dropped interest rates by half a point, but the mortgage rate markets are slow to adjust down. The general, more favorable, interest rate environment will be better for the last quarter of 2024 and should provide the necessary momentum going into 2025.
The other major factor over the last 30 days has been in pine lumber production. Three mills in the south have shuttered, and pine owners are still trying to determine the impact of Hurricane Helene on pine timber. If you include all the docks and decks destroyed along the Florida west coast, the pine markets are shaping up for higher costs in the future.
In short, the minimal increase in this month’s Index is probably short-lived as these factors will weigh on pricing. Builders should prepare for higher costs.
Here are the notable price movers on this month’s Index.
The spruce markets were quiet despite continued curtailments and Canadian tariff uncertainty. Studs were down at .8 percent while 2x4 spruce added 1.6 percent and 2x6 increased by 1.4 percent.
The pine markets were up substantially impacted by the mill closures and hurricane issues related to mill temporary closures and production issues. 2x4 pine increased 9.5 percent, 2x6 pine added a whopping 25.0 percent and 2x12 pine jumped 10.6 percent.
Trusses were up 2.3 percent on higher pine lumber pricing.
2x4 treated pine added 7.9 percent while 4x4 treated pine was flat.
CDX pine plywood was flat and OSB sheathing added only 1.6 percent as slower housing production hurt demand. Expect these markets to rebound as rebuilding begins and housing production gets back to normal. Several mills were down for multiple days due to hurricane-related issues.
Engineered wood LVLs were down 3.4 percent on slower demand.
With all the major flooding in Florida and North Carolina, builders should anticipate higher pricing in the next month or so in drywall and insulation as well as tightening supply. There is a lot of drywall and insulation that must be replaced in those areas. Plus, there will be additional pressure on roof shingle pricing as hurricane-damaged roofs are repaired over the next three to six months.
The real key over the next month or so is how much pent-up demand and backlog has developed because builders have lost several weeks in production due to the hurricanes, plus no one fully understands the full impact of the interest rate decreases. In three weeks, the presidential election should be resolved, and many believe this will also be a catalyst for increasing demand as the focus changes in America.
Circumstances are lining up for the commodity markets to increase in price in the next several months and builders should be cautious in bidding and ensure that contracts have price escalation clauses within them.
Until next month, let’s hope for no more hurricanes, a lot more pumpkin-spiced coffees, and cooler weather. Go Vote!
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.
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