*URGENT–BREAKING NEWS* August 2020 Whole House Commodity Index Hits Record High Price
The RoMac Building Supply Whole House Commodity Index (Index) for mid-August 2020 hit an all-time record high price as manufacturers and mills struggled to keep up with demand amid curtailments and reduced production due to COVID-19. Over the last 30 days, the Index increased 7.9 percent to $39,534. Not only are wood commodity prices at record highs, spot shortages on many popular items also persist. Truss plants across the state are running out of lumber and premium grade products are getting almost impossible to find.
This Index represents the basic structural materials to build a home from the foundation to the rooftop, and it rose 7.9 percent in just one month. These price increases are wiping out profits for builders and contractors and wreaking havoc for budgeting and planning future projects. The amount and rate of these increases are not sustainable. At some point, owners and builders will cry no más and they will delay or even cancel projects.
The following are the notable price movers over the last 30 days:
- CDX pine plywood was up 19.9 percent while OSB increase an unimaginable 60.9 percent, or $7.31 per sheet.
- 2×4-92 5/8 spruce studs are very difficult to find, and their price increased 32.0 percent in the last month, or $1.11 per board.
- Dimensional 2×4 spruce added 33.4 percent while 2×6 spruce soared 33.3 percent. For 2×6 spruce, that is an increase of $3.66 per stick.
- 2×4-16 pine is not available in many areas and its price increased 53.2 percent. At cost, this price increased by more than $3.50 per board over the last month.
- 2×6 pine is up 55.5 percent while 2×12 added 26.1 percent. Inventory on 2×6 is thin and the inventory that is available is selling above print.
- 4×4-8 treated posts increased 25.7 percent and has almost tripled in price over the last year. One year ago, builders paid $8.50 per stick less than they are today. That is amazing!
- Engineered beams are up 10.6 percent on increased costs and heavier demand.
- Trusses are up 7.1 percent on much higher pine costs. Expect pricing to go even higher as truss plants struggle to find higher grade pine. Premiums above print are the norm.
- Interior doors are up 2.0 to 5.6 percent on increased labor costs to build doors.
While windows and shingles did not incur a price increase over the last 30 days, lead times and availability are worsening. Most shingle companies have announced an increase of four to six percent for mid-August along with limited color availability, longer lead times, and planned allocations. Lead times for windows are stretching out by multiples of weeks and concerns over glass availability is drawing anxiety in the industry. Builders should order shingles and windows sooner in their production cycle to build in time for delays.
In last month’s Index, I advised builders to use our Price Adjustment Clause linked to this Index in their contracts, because these kinds of increases cannot be covered. If you would like a copy of the Price Adjustment Clause, email Rebecca.Ballash@RoMacFL.com and she will email you the clause and sign you up for this free report.
Finally, everyone wants to know will happen with the market.
First, no one knows because we are in a pandemic and election year where a new surprise is offered every day.
One thing I do know—the large numbers like housing starts and sales do not support these record prices. I understand low supply and delays in production due to COVID-19 are creating these pricing issues. However, these types of prices will slow construction demand. When these prices level and start to give indications of moderating, the numbers will drop like a rock. It is hard to envision there is enough market support for these pricing levels to continue much past hurricane season.
In the short-term, a bad hurricane season will inflame certain parts of the market, so builders need to be careful about long-term contracts and bids. Protect yourself with a Price Adjustment Clause in your contracts, and slow playing projects may be a good strategy if you are underwater financially. No one wants to work for nothing—or worse, pay someone to have you work for them. Sign up for our updates and we will keep you informed.
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 Rebecca.Ballash@RoMacFl.com. For great videos and Don’s weekly column, go to www.AroundTheHouse.Tv to subscribe to our YouTube channel and weekly updates.