By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) for June 2024 decreased 10.0 percent to $374.78 per thousand as the wood commodity markets continue to react to a soft housing market created by stubbornly high mortgage rates and building costs. As compared to last year, July 2023, the Index is down $53.12 per thousand or 10.1 percent. The markets have been in a deflationary tone over the last year.
The dimensional portion of the Index has taken the greatest beating and mills are starting to cry, uncle. Over the last 30 days, lumber is down 7.4 percent with no species escaping the downward trend. Studs are down 3.3 to 7.0 percent while dimensional spruce declined 5.1 to 13.3 percent depending on length. 2x4 pine dropped 7.4 percent while 2x12 pine retreated 4.3 to 7.5 percent.
The big takeaway is that our dimensional lumber part of the Index is down 25.5 percent since last July- that is brutal.
The sheathing portion of the Index is down, but not at the pace of lumber. For the month, OSB dropped $50 per thousand, or an average of 12 percent. CDX pine gave back 8.8 to 11.6 percent depending on thickness- most retreated in the mid-50s per thousand. Since last July, the sheathing portion of the Index is down 8.5 percent or $34.42 per thousand. This equates to an average per-sheet drop of $1.10 since last July.
The Federal Reserve is starting to discuss interest rate decreases but nothing is firm, and until there is real relief these markets will remain restrained. The collateral damage could be a restriction of manufacturing in wood commodities as mills are starting to have real conversations about curtailments and closures. Long-term this will be detrimental to the housing market when it begins to rebound. It is extremely hard to crank up a mill after a curtailment and closure because of labor and equipment reactivation.
Finally, hurricane season is here, and this could be a big wildcard to drive up costs quickly. If the forecasts are correct, it could be a tough year, and builders should be very wary about using mid-July commodity pricing for projects starting in the fall.
Have a great last half of July and stay cool!
The RoMac Wood Commodity Index is a weighted lumber and sheathing composite based on usage in Central Florida. By using wholesale pricing, the Index is a good indicator of the pricing direction for the next 30 days.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida, he is a former president of the Southeast Mississippi Home Builders Association and a past Associate Vice President of the Home Builders Association of Lake County.
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