June 2015 Whole House Commodity Index

June 2015 Whole House Graph


by Don Magruder, CEO of RoMac Building Supply

Lumber markets surged higher over the last 30 days, which helped boost the Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) 0.1% to $29,967.65. Overall, the Index was subdued by declines in trusses, rebar, and narrow width pine lumber. While housing starts surged 20% to an annual rate of 1.1 million, most housing experts are not ready to declare that the housing market is fixed. Over the last several years, there have been many false positive signs that housing was rebounding, and most in the industry want to see multiple months of consistent growth.

The following are some of the particular movers in the Index since last month:

  • Foundation wire mesh increased 5.4% while rebar dropped 8.3% on heavy imports.
  • CDX pine plywood remained flat with a 0.5% increase while OSB sheathing added 4.7%.
  • Trusses dropped 3.0% on declines in narrow width 2×4 pine.
  • Spruce studs increased 8.5% while 2×4-16 spruce added 8.0% and 2×6-16 spruce added 11.3%. Spruce prices have declined so much over the last few months, this move is almost considered a “get back.”
  • Pine dimensional lumber had 2×6 up 4.0% while 2×6 edged up 11.3%.
  • 4×4-8 treated posts declined 3.9%.

New building code changes, which go into effect at the end of June, will increase the cost of building in Florida. This is exactly what homebuilding does not need. The construction industry is dying from a thousand cuts—with changes in building codes, tweaks in mortgage approvals, and new local impact fees. Just this weekend, a mortgage broker from a major bank told me that it is still very difficult for ordinary people to get lending. As long as this persists, expect housing to miss expectations.

Where does the market go from here? Few people have confidence these price increases from last month will stick. The little carry-over in the pine plywood market is not a good sign, and the collapse of rebar prices suggests demand is limited. May’s housing blip could be pent-up demand from winter. It will take several months of housing numbers to determine whether these increases in lumber were the indicators of a blip or trend.

The other big news is that the price increase in roofing got battered when GAF decided not to implement a price increase on shingles. The company also announced plans to shelve a manufacturing facility in Moberly, Missouri. Plus, consolidation among the huge national contractor suppliers is an indication that companies will be consolidating and closing more locations.

The parameters of housing indicate rough economic conditions will continue for the foreseeable future. Builders should price projects close and keep all bids current in order to avoid getting caught in the volatility of the pricing storm.

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 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@romaclumber.com.