July 2014 Whole House Commodity Index
WHOLE HOUSE COMMODITY INDEX – July 2014
by Don Magruder, CEO of RoMac Building Supply
The Ro-Mac Lumber & Supply, Inc. Whole House Commodity Index (Index) for July is firmly strapped in the rollercoaster of uncertainty. The 0.4% drop in price in June was reversed in mid-July to a 0.7% increase to $30,423.25, which is a record high. Over the last three months, pricing has bounced in a narrow range; however, strength in plywood and spruce products fueled the latest incline in the pricing rollercoaster.
Most dealers and builders are growing increasingly frustrated with the construction market’s lack of consistency, reminding many of a misfiring motor. While pockets throughout the country and state are performing well, others are down. There seems to be a continuous change of who is up and who is down.
For most, the root cause of this uncertainty lies in Washington, D.C. An incoherent housing policy coupled with a daily crisis or scandal has left many potential buyers on the sidelines. Furthermore, the biggest challenge to a full-fledged housing recovery continues–ordinary people cannot get credit.
Unless there is a hurricane, a national emergency, or an epiphany by the folks in Washington, D.C. to work together and crank-up the economy, we can expect the rollercoaster to continue. Builders should be aware these $20 ups and downs in commodities could cost them money. Bidding projects with a little pad along with a price escalation clause is probably a good idea, just in case we get a big hurricane this year.
Here are the notable price changes in this month’s Index:
- Wire mesh dropped 4.2% while rebar eased off 1.7%. Too much steel is being imported.
- Concrete is up 2.5% on a mid-year increase, and more may be on the way if the increase in bagged concrete is enforced. Concrete increases are meeting resistance.
- 2×4 yellow pine gave back 4.8% while 2×12 pine declined 6.1% and 2×6 pine dropped 6.2%. Pine did not follow the spruce market’s increase.
- Spruce dimensional 2×4 was up 12.5% while 2×6 spruce increased 16.7%. Heavier exports are fueling that market. Spruce studs added 6.1%.
- CDX plywood increased 5.8% while OSB finally firmed up adding 3.6%.
- Manufactured wood added 5.4% and 4×4 treated added 3.1%.
- Trusses dropped 2.1% on lower pine numbers.
Whether an upward price momentum can build to sustain these increases remains to be seen. The pine market will most likely follow the increase in spruce as it tries to catch up to buyers.
Builders, be very mindful–the months of August and September are the worst months for hurricanes. One bad storm could change the market from being on a rollercoaster to a rocket; protect yourself.
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 email@example.com.