November 2012 Whole House Commodity
WHOLE HOUSE COMMODITY INDEX – November 2012
by Don Magruder, CEO of RoMac Building Supply
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for November surged dramatically on the ill effects of Hurricane Sandy’s direct hit on the Northeast United States. The Index jumped 3.4% over the last 30 days to $27,559.93, and is a whopping 11.8% higher than just one year ago.
Hurricane Sandy is the type of event I have fretted and warned about for some time now, because it could expose the true frailty of the country’s supply chain. In my view, the Great Recession has resulted in supply chain destruction and the means for the country handling spikes in demand due to disasters is constricted, which will lead to longer lead times and higher pricing. Builders and dealers should also understand these spikes are just the first blows to the supply chain; expect other areas such as drywall, roofing, windows and doors to be under severe pressure later.
Then there is the impact of the election. It seems this election only ensured one thing–uncertainty. The same people at all levels are in charge, and it looks like the country is peddling very hard toward that financial cliff. Most companies’ expansion plans are now on hold as business leaders work to figure out how they are going to navigate all of the new regulations that are about to be crammed down their throats. This uncertainty combined with emboldened federal regulatory policy may be the final blow for companies barely hanging on.
The following are the big movers in the Index:
- Masonry rebar increased 4.4% on higher scrap pricing.
- CDX sheathing jumped 7% while OSB sheathing increased an unholy 27.3%.
- Felt was up almost 2% on increased demand.
- Dimensional 2×4 pine was up 19.2% with 2×6 pine following at 18.1%, and wide width pine up 9.1%.
- The heavy increases in pine pricing lifted truss pricing 8.6%.
- 2×4 #2 spruce increased 15.4% while studs followed along with a 16.8% jump; however, 2×6 spruce only increased 6.0%.
Builders should keep in mind that most of the country’s drywall manufacturers have announced a whopping 30% increase in drywall as of January 1, 2013, and Hurricane Sandy’s massive rebuilding could lead to outright allocations.
However–and this is a big however–if the folks in Washington, D.C. allow this country to go off the fiscal cliff then pricing will not be an issue, because the country will probably plunge back into a recession. The next six weeks are very important; let us hope common sense is discovered in our nation’s capital.
My recommendations for builders are:
- Don’t extend long-term quotes without price escalation clauses.
- Plan sooner and expect delays in special order items.
- Develop strong relationships with suppliers who you believe will be here in six months.
- Stay in touch with suppliers to keep abreast of price and supply issues.
Finally, Thanksgiving is less than a week away. We all have so much to be thankful for–count your blessings.
The Ro-Mac Lumber 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 email@example.com.