September 2020 Whole House Commodity Index Sets Another Record High Price

The RoMac Building Supply Whole House Commodity Index (Index) for mid-September 2020 set another record high as wood-related building materials continue to remain in tight supply while manufacturers struggle to catch up from COVID-19 manufacturing delays. Since mid-August, the Index rose to $42,401 or an increase of 7.3 percent. The data point that puts these market conditions into perspective is that since September 2019, this Index has increased by $9,495 or an additional $4.32 per square foot in material pricing—that is a huge number.

Hurricane Laura in Louisiana in late August was an aggravation to the market as it mainly affected timber production instead of creating widespread destruction. Currently, Hurricane Sally is threatening the northern Gulf Coast and it remains a mystery what effect this hurricane will have on the markets. My guess is that it will have a major impact on the roofing supply chain, which is already strapped with allocations, reduced color offerings, and longer lead times. Plus, if this storm sparks heavy flooding in Mississippi and Alabama that could exacerbate the pine markets as harvesting trees could hit serious delays. Builders should keep an eye on shingle pricing and availability as well as increased pricing and delays for wood trusses.

Here are the notable price movers in the Index over the last 30 days:

If you look at some of the increases over the last month, it appears the rate has slowed down. However, keep in mind that the market was at record levels and although the increases are smaller in percentage the dollars could be as much.

The futures later in the year are pointing to lower pricing and it appears the markets could start settling somewhat in late September and October. Hurricanes in the South and massive wildfires in the West do not help, because these events bring more emotions into the pricing market and they have a real impact on harvesting timber.

Most importantly, builders should not try to outguess the market. Instead, they should start building in high pricing, because prices can always be lowered later in the year. At the levels of these increases, projects can turn into huge losses. It is imperative that builders include a Price Adjustment Clause in their contracts as the delays from COVID-19 are not resolved and Mother Nature is not relenting. If you would like a copy of the Price Adjustment Clause linked to this Index, email Rebecca Ballash through our contact page, and she will email you the clause and sign you up for this free report.

Now is the time to work with real numbers and throw away your happy crystal ball.

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 through our contact page. For great videos and Don’s weekly column, visit the Around The House website to subscribe to our YouTube channel and weekly updates.