By Don Magruder
The RoMac Building Supply Whole House Commodity Index (Index) for August 2024 increased 1.2 percent to $49,624, but as compared to last August, the Index is down 1.2 percent which continues to show inflation moderation in the housing supply market. The Index increase for the month was driven by wood-related commodities which appear to have bumped into a bottom and are searching for higher levels as the prospects of drops in interest rates by the Federal Reserve come into focus. Most believe that moderations in mortgage rates will begin a new cycle in construction and housing supplies in America remain inadequate as pent-up demand continues to build.
The following are the main price movers over the last 30 days.
Foundation rebar dropped 5.0 percent on lower steel pricing and weaker demand
CDX pine was up 10.7 percent while OSB sheathing gave back 3.8 percent in a market reset. Hurricane season could dictate moves in the next few months.
Dimensional pine lumber moved upward with 2x4s adding 15.2 percent, 2x6 up 7.6 percent, and 2x12 climbing 6.6 percent. Rainy weather is hampering logging.
Spruce moved higher as Canadian duty issues and new European logging rules threaten pricing over the next quarter of so. 2x4 spruce was up 12.9 percent, 2x6 added 16.7 percent, and 2x4 studs modestly increased 2.4 percent.
House wrap added 3.0 percent on increased costs from the manufacturer.
Wood moulding prices were up solidly 5.0 percent on much higher container pricing and threats of a longshoreman strike at key ports in the United States in October. Angst is starting to build in this scope of materials.
The key factors driving these markets in the next quarter are interest rates and hurricane season. A drop in interest rates and a bad hurricane anywhere in a populated area of the United States could quickly drive these markets up. Long-term it is becoming clearer that all political parties are recognizing the deficit in housing, and over the next year or so, I expect significant housing initiatives to boost affordable housing supplies.
In short, there is a good chance this Index has bottomed out and prices will only continue to move up. Builders should keep that in mind as they bid on future projects. It is a good time to monitor the markets a little closer given the potential volatility.
Now- let’s get ready for football season.
The RoMac Building Supply 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 RoMac Building Supply in Central Florida.
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