September 2022 Whole House Commodity Report
By Don Magruder
The RoMac Whole House Commodity Index (Index) for mid-September 2022 gave back its gains in August as an uneventful hurricane season and increased mortgage interest rates continued to dampen down commodity pricing. Over the last 30 days, the Index dropped 2.9 percent to $53,224 which is near levels during the beginning of the year, but still 22.7 percent higher than last September. Non-commodity building material items have seen no capitulation as trucking and labor costs remain high. Employment levels remain high in America and wages have yet to see any decline while finding qualified workers remains a challenge. So much of the building material product sector is labor and logistic driven, and few see any meaningful wage deflation until unemployment rises.
On the horizon, a potential national rail strike could create price and supply angst as many dealers have dropped on-ground inventories significantly. The current labor pressures are reminiscent of the 1970s when inflation fueled overly high wage growth. There is still a solid 6 weeks of hurricane season remaining, and the African dust in the tropics, which has quelled most tropical development, may be waning. A hurricane and a rail strike in the next few weeks could quickly turn around these markets.
Here are the significant price movers on this month’s Index.
Foundation wire mesh dropped 22.5 percent and rebar eased down 4.2 percent on slower demand.
Blocks and concrete added 1 percent as monthly adjustments due to supply pressure appear to be commonplace.
CDX pine plywood dropped 2.8 percent while OSB sheathing gave back 17.5 percent. Current activity nationwide is subduing pricing.
Yellow pine 2x4s dropped 20.3 percent and 2×6 pine printed down 18.5 percent as mills searched for buyers. 2×12 pine dropped 20.2 percent as LVLs become more available and builders retreated from pine beams and plywood.
2×4 spruce was down 10.6 percent while 2×6 spruce dropped 6.4 percent. Spruce studs gave back 7.1 percent. Lower safety stock on the ground has relieved supply pressures.
Treated post added 2.7 percent while 2×4 treated gave back 18.7 percent.
Millwork casing dropped 16.3 percent while base gave back 16.9 percent.
Door pricing was up 1 to 3 percent on increased labor and freight costs.
The year-over-year comparison of a 22.7 percent increase demonstrates clearly how the labor and trucking issues have adversely affected the pricing. These will be very slow to correct as workers and trucking firms are in no mood or position to cut prices as core inflation nationally remains elevated.
Truly, the next four weeks could determine a lot. It is almost certain the Federal Reserve will add another ¾ points to interest rates in the next meeting, and the rail strike and hurricane season could provide some brief periods of rapid inflation. Builders should be wary about dropping prices too quickly as core inflationary issues are far from resolved and volatility remains a real possibility.
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.