September 2021 Whole House Commodity Index
Whole House Commodity Index
By Don Magruder
After two months of significant price declines in the RoMac Whole House Commodity Index (Index) for mid-September 2021, the Index increased by .9 percent as commodity lumber and sheathing prices increased firmly, cementing a bottom in the markets over the last couple of weeks. This month the Index settled at $43,478 which is 2.5 percent more than September 2020 and 8.7 percent more than the last Index in December 2020. Many in the wood commodity markets believe the retreat over the last couple of months was too much as mills and manufacturers struggled to cover rising costs and loss of productivity due to the new COVID-19 Delta variant.
Last week, I moderated the Florida Building Material Alliance with top executives in the building material supply chain, and there were two major takeaways. First, the supply chain disruptions will not resolve until the COVID-19 pandemic has ended. When asked about the future of pricing, all believed next year’s pricing will be higher due to continued issues with the labor shortage and rising costs. In the coming days, the FBMA will be releasing a video of the Executive Panel, and if you would like to view in detail the thoughts of this group, contact us for a link to the video.
Below are the price movers over the last 30 days.
- Wire mesh and rebar retreated 2.3 percent on slower demand. Wire mesh continues to remain hard to procure. Rod chairs were up 19.9 percent on tight supply.
- 5/8 CDX pine plywood jumped 21.3 percent on increasing demand due to replenishment and OSB sheathings added 4.3 percent.
- Pine dimensional lumber was mixed. 2×4 pine declined 2.5 percent and 2×12 pine gave back 11.0 percent, but 2×6 pine added 10.5 percent. Heavy tropical rains in the south and rebound in the spruce markets will pressure pine pricing.
- 2×4- 92 5/8 #2 spruce studs increased 2.8 percent while dimensional 2×4 spruce jumped 20.4 percent with 2×6 spruce jumping 21.7 percent. Mills are curtailing production as pricing went too low, too fast, which is limiting their ability to ship products profitably.
- 2×4 treated lumber declined 5.0 percent on less demand while 4×4 treated post added 8.1 percent on increased demand.
- Truss Pricing declined 7.0 percent as manufacturers replenished with lower price wood, but increased costs in labor and a 15.0 percent increase in metal plates kept the declines much lower than expected.
- Vinyl soffit and trim were up almost 5 percent.
- Wood mouldings jumped 15 percent as foreign supply chains remain fractured do to COVID-19.
- Metal hangers were up 13.3 to 15.1 percent on tight steel supply and monthly increases in raw material costs. Ancillary items like screws were up almost 10 percent.
- Cement Siding fluctuated down 5.7 percent.
- Roofing shingles added on average 4.0 percent as manufacturers still struggle with managed supply and long lead times.
There are a lot of factors which could potentially roil the markets in the next few months.
- In Louisiana, Hurricane Ida has disrupted resin manufacturing which was already struggling to meet demand. Expect anything made with resins to increase in price and decrease in supply.
- COVID-19 in the rest of the world is far from resolved. Many countries are in some form of modified lockdown or restrictions, and this could become worse in the winter.
- Housing demand, especially in Florida and Texas, will pressure labor and supply. As the COVID-19 Delta variant resolves, builders should expect demand for products to increase. Housing inventories across the country are woefully low and historically low in Florida.
- Hurricane Season has extended out lead times further in many roofing products. Hurricane season is not over, and heavy rains in the pine belt will slow harvesting.
With commodities coming off the bottom, builders should be mindful that a new pricing level has probably been set. Labor shortage is an issue and expenses continue to rise, which gives little hope that prices in other building material sectors will wane. Anything made with steel remains a huge problem, and no one sees any relief in supply or pricing for steel related items. Garage Doors could be the next obstacle, and windows remain a problem as demand is outstripping supply.
The bottom line – expect pricing to increase, lead times to expand, and labor to remain tight. Builders who will do the best are those who are planning needs well in advance.
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 Keri Sudman by selecting Signup for Email Commodity Reports in the form under Department or Store. For great videos and Don’s weekly column, go to www.AroundTheHouse.Tv to subscribe to our YouTube channel and weekly updates.