June 2014 Whole House Commodity Index
WHOLE HOUSE COMMODITY INDEX – June 2014
by Don Magruder, CEO of RoMac Building Supply
I asked this question in May: “Has the building season finally started or does this month’s Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) represent a blip on the chart?” The answer became clear over the last 30 days–it was a blip. The housing industry in America remains on a roller coaster; with each rise and fall, uncertainty increases.
The June 2014 Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) decreased 0.4% to $30,214.83, as dimensional lumber and sheathings gave back increases in May. Other than a few minor price adjustments in some foundation materials, most building materials pricing remained flat. Future activity remains uncertain.
Mid-East turmoil coupled with rumors of war are sending oil prices higher. This could force some companies to increase pricing despite spotty demand. Trucking continues to be a problem for most manufacturers. If demand were strong, trucking would be cited as a major reason for price increases.
The following are the notable price movers for this month’s Index:
- Rolled foundation plastic dropped 8.7%.
- Rebar added 1.0% on higher steel pricing while most foundation accessories retreated 5.0%.
- 2×4 pine was up 8.6%, causing a price increase of 3.4% in trusses.
- Spruce studs were down 3.0% while dimensional spruce gave back 9.0%.
- CDX pine plywood sheathing dropped 6.4%, while OSB retreated 16.3% to mid-winter pricing.
Most manufacturers and mills are not in the position to weather a long-term market downturn without making significant cuts in operations or increasing prices. If the current summer slog in the market continues, expect manufacturers to curtail production and possibly idle some facilities.
Window manufacturers continue to struggle with production issues despite the lackluster demand, and this may be a microcosm of how bad the talent levels are in the industry. With a sluggish economy most would believe good talent is abundantly available; however, it is not. Like many, I am concerned when housing starts finally reach the normalcy of 1.2 million.
The biggest price increase on the horizon is in cement related products. Most of the main producers in Florida have announced sizable increases for July, and it will be determined if they will stick. Many continue having problems getting new mining approved and rising fuel prices will feed the need for increases.
Builders, the market remains terribly uncertain and world affairs could once again wreak havoc on demand. Hurricane season is predicted to be less intense, but it only takes one. Be cautious bidding projects during a down market, because what goes down will surely go up.
Have a Happy Fourth of July and God Bless America!
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 firstname.lastname@example.org