September 2019 Whole House Commodity Index
In the last 30 days, there has been a Category 5 Atlantic hurricane threat on the East Coast with major destruction in the Bahamas as well as a continued bloodbath in lumber mill curtailments in Canada. However, pricing in the RoMac Building Supply Whole House Commodity Index (Index) increased tepidly as builders and suppliers faced mixed growth projections. The Index increased 1.1% to $32,906 with most of the increase linked to the spruce curtailments in Canada. In the first half of 2019, Canadian lumber production was down 9.5%, and it’s only gotten worse in the third quarter. Despite the huge cuts in production, this year’s pricing in spruce versus last year is still off by 15%, which indicates the overall demand equation is weak.
Below are the primary price movers in the Index over the last 30 days:
- CDX pine plywood was up 7.5% and OSB sheathing added 9.4% fueled on the threat by Hurricane Dorian.
- Mill curtailments in Canada pushed up spruce dimensional pricing 8.9% for 2×4 and 7.5% for 2×6. Spruce studs added 4.3%.
- Pine followed the upward trend for narrow widths. 2×4 pine was up 8.9% with 2×6 pine adding 12.4%. 2×12 wide width pine gave back 10.9% on excess supply.
- Trusses were up 3.0% on higher narrow-width pine pricing.
- Nails added 17.3% as tariffs started to impact nails, screws, and hardware in the 10% range.
- Fiberglass shingles gave back 3.3% to 5.5% on excess supply. A slow hurricane season could send roofing shingle prices plunging.
- Specialty drywall, such as ceiling board and moisture resistant board, added 3.8% to 4.6%. Drywall companies are struggling to make price increases stick.
- Better supply dropped casing moulding 3-cents per foot and base moulding 2-cents.
A lot of other factors drove pricing over the last month, and it’s very stunning the small impact this major hurricane had on the Florida market. Hurricane season is not over and there is still a chance for the big one that will truly move the needle. However, if the last 30 days included Hurricane Dorian and significant curtailments and only pushed up pricing 1%, this gives pause for long-term pricing. A continued unimpressive, or worse yet, downward housing trend could bottom the market at year-end.
Over the next few months, builders should protect themselves in the short-term and realize pricing could struggle to hold on. Rebidding projects by year-end could be prevalent. Be sure to write extended bids for projects in pencil.
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. Go to romacfl.com to sign-up for the Index and other free market reports. To sign-up for this information via email, contact Rebecca Ballash at firstname.lastname@example.org. For great videos and Don’s weekly column, go to www.AroundTheHouse.Tv to subscribe to our YouTube channel and weekly updates.