January 2014 Whole House Commodity Index

January 2014 Whole House Graph


by Don Magruder, CEO of RoMac Building Supply

Surprisingly, the Ro-Mac Lumber Whole House Commodity Index (Index) for January 2014 increased 1.1% to $29,495.71, despite real winter conditions having most of the control.  This indicates that mills and manufacturers are in firm control of the supply portion of the equation.  It also does not bode well for moderate spring pricing with pricing arching up in spite of stagnant demand driven by record cold.

To put this in perspective, the following are some interesting comparisons:

  • Since last January, the Index is 3.4% higher; however, last year the devastation caused by Hurricane Sandy coupled with a milder winter pumped up demand.
  • In April 2013, the Index reached its record high of $30,023.04, and while January’s amount is 1.8% lower, it stands as the second highest price since the Index began in April 2005.
  • In October 2010 following the Great Recession, the Index appeared to have bottomed out at $23,834.79.  Since that point despite a few gyrations the trend has been upward.  Over the last 39 months the Index has increased 23.7%. 

These numbers do not indicate that prices will decrease in 2014.  If anything, if housing starts top one million for the year, pricing could increase double digits due to struggling supplies.  

While the high price scenario is easy to predict there are still real systemic problems with housing, from the new mortgage rules to the problems with flood insurance.  Not to mention the lack of capital availability for small companies.  The next couple of months should go a long way in predicting the year.

Here are some of the notable price movers for January:

  • Rebar foundation rods were up 4.2% due to issues with foreign imports.
  • A general increase in sheathing prices resulted in a 4.2% increase in CDX pine while OSB sheathing increased 7.3% in price.
  • Felt prices went upward 3.8% on increased manufacturing and delivery costs.
  • 2×4 spruce jumped 3.8% while 2×6 spruce jumped even higher at 4.8%.
  • Pine 2×6 dimensional lumber was up 12.2% while wider width pine hovered around a 5.0% increase.
  • Trusses increased 2.3% on higher lumber and plate costs, which are mainly attributed to trucking.
  • Drywall prices soared on industry wide increases of about $30 per thousand, or 13.6% on regular board.
  • Announced window price increases were around 2.0% for standard items, and up to 5.0%-7.0-% for specialty windows.
  • A 5.0% plus decrease in shingles were sold as special winter buys.
  • Vinyl siding prices dropped by double digits with special winter buys. 

There was a lot of movement in many areas, which netted out an increase.

If the forecast starts come to fruition and the country experiences nasty spring storms, builders should be wary of price increases.  Jobs being bid for later in the spring and summer should include a price escalation clause, as pricing could elevate very quickly.  Smart and cautious bidding now could save a builder thousands of dollars in losses later.

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.