September 2023 Whole House Commodity Report
By Don Magruder
The RoMac Building Supply Whole House Commodity Index for mid-September 2023 increased 1.4 percent to $51,229, and this makes the third consecutive month of increases, and the Index is now at the highest price since October 2022. This current run of price increases is despite some of the highest interest rates since 2008, and a weather pattern which has been anything but conducive to construction. The market prices are being driven by tight labor, higher wages, and increased fixed costs for insurance and fuel at all levels. The labor issues in Florida continue to struggle as immigrant labor remains very tight due to the new legislation passed by the state of Florida.
The following are the notable price changes on the Index in the last 30 days.
Foundation wire mesh dropped 12.5 percent and 5/8” rebar fell 4.6 percent on better supply.
CDX pine plywood jumped 10.8 percent on tightening supply while better supply availability dropped OSB sheathing 4.6 percent.
Pine dimensional lumber was mixed. 2x4 pine was up 17.1 percent while 2x6 dropped 4.3 percent and 2x12 gave back 4.8 percent. Specialty 2x4 pine increased further with tighter supply and longer lead times.
The big increase in 2x4 pine drove up truss pricing by 7.7 percent.
Borate treated 2x4s were up 11.2 percent on higher pine pricing while 4x4 treated post gave back 6.5 percent.
Dimensional 2x4 spruce was up 15.4 percent while 2x6 spruce jumped 20.4 percent. Oddly, spruce studs gave back 5.0 percent on good inventories.
Engineered joists decreased by 4.5 percent on plentiful supply.
With oil surging over $90 per barrel and core inflation was hotter last month than expected, there is little impetus for pricing to decline, especially in Florida with runaway fixed costs in labor and insurance hitting most businesses. Unfortunately, there is little chance that state government can take meaningful action to address these big problems until the spring, and many doubt they will then. The ability for construction-related businesses in Florida to drop pricing will be difficult without a significant cooling in the economy or real policy changes by the state regarding insurance and immigrant labor.
The expectations are for housing demand in Florida to remain good for new residents moving to the state but difficult for those living in the state seeking affordable housing. This demand equation should keep material and labor costs firm to higher through the remainder of 2023. This expectation could change quickly if Florida or the Gulf States are hit by a major hurricane in a populated area. Higher interest rates will subdue housing, but rates will also suppress the ability of companies to add in new supply options.
In short, the markets have gone from playing checkers to chess, and builders will need to be mindful of changes and be very strategic in their projects.
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.