September 2018 Whole House Commodity Index
WHOLE HOUSE COMMODITY INDEX – September 2018
by Don Magruder, CEO of Ro-Mac Lumber & Supply, Inc.
Nothing is better for sagging prices in the commodity market than a hurricane. Since last month, the markets got just what they wanted—another reason to raise prices. The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) jumped 1.9 percent to $34,893.90, ending a two month stretch of declines. Needless to say, Hurricane Florence is the main driver of the market and it is yet to be determined how much structural damage occurred. Based on wind velocity and flooding conditions, chances are Hurricane Florence will be a shingle and sheetrock storm.
The primary price movers in the Index since mid-August were the following:
- Foundation wire mesh dropped 7.1 percent on slower demand and order pullbacks.
- CDX pine jumped 31.5 percent while OSB sheathing only added 5.3 percent. It appears the CDX pine market may be ahead of itself and banking on another hurricane.
- Pine dimensional was mixed as narrow width 2×4 pine was up 13.8 percent while wide width 2×6 pine dropped 7.8 percent and 2×12 declined 21.3 percent. A sign that truss plants were loading up on lumber.
- Trusses were flat, easing off an unimpressive 0.5 percent.
- Dimensional 2×4 spruce was up almost 2.0 percent while 2×6 spruce added 7.8 percent. Spruce studs could only manage a 1.0 percent increase.
- A small sector, but emblematic of the continuing tariff issues with China, is fasteners. Fasteners and screws were up 20.0 to 31.3 percent. Tariff warnings are flashing on all Chinese goods in September.
- Treated 4×4 posts were down 12.8 percent as treaters searched for buyers.
- September marked another increase in shingles, with pricing edging up 2.6 to 4.8 percent. Before Hurricane Florence, many questioned whether this increase would stick—not so much now.
- Drywall manufacturers gave back $5 per thousand (or about 2.0 percent) in hopes to spur demand.
- Garage door openers are up 2.2 percent on tariff and trade issues from China.
If the hurricane season continues to heat up, expect pricing to go higher and find a floor in the third quarter. Although this year’s hurricane season has not matched the devastation, it only takes one hurricane to do so.
The housing demand equation continues to be unimpressive. Without support from more hurricanes, the markets may be set for a fourth quarter decline. Builders should remain diligent with a price adjustment clause in their contracts. Most importantly, builders must keep a close eye on items that could be affected by a huge increase in tariffs on Chinese goods. The tariff issue may be the biggest threat to building costs in the next few months, as most people have little idea how many products and manufacturers this will affect. Hang on! It could get a little choppy—not the weather, but the markets.
The Ro-Mac Lumber & Supply, Inc. 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 Ro-Mac Lumber & Supply, Inc. in Central Florida. Go to www.romaclumber.com to sign-up for the Index and other free market reports. To sign-up for this information via email, contact Rebecca Ballash at email@example.com.