By Don Magruder
The RoMac Building Supply Whole House Commodity Index for June 2024 declined 1.4 percent to $49,054 from the prior month as wood commodities continue to struggle to find a bottom in price while the housing markets across the country remain in the doldrums. July marks the first time all year that this Index has seen a year-over-year decline. Despite only being a .1 percent decrease, it indicates the housing market remains muted due to the higher interest rate environment. The interest rate declines that many thought were coming last fall for 2024 have not materialized, and current indications suggest there could be none for the year.
If these wood commodity markets continue to trade at these levels, expect significant mill curtailments and closures as many will begin to throw in the towel to cut growing losses. This would be bad for builders when the housing markets return to normal or there is a spike in demand due to a weather-related issue because overall capacity will not exist. In one sense, these markets today could create a huge supply issue in a year or so.
The notable price movers for the month are basically all wood commodities.
Foundation rebar added 2.0 percent on increased costs.
Concrete dropped 6.0 percent on more competitive pricing.
CDX pine plywood was down 10.5 percent while OSB sheathing dropped 13.0 percent.
Yellow pine was down across all sizes. 2x4 pine dropped 4.1 percent, 2x6 pine dropped 10.8 percent, and 2x12 pine declined 3.8 percent.
Spruce retreated as well with 2x4 dimensional spruce dropping 5.0 percent while 2x6 spruce dropped 8.5 percent.
Spruce 2x4- 92 5/8 #2 Studs retreated the least giving back 3.2 percent.
The declines in 2x4 pine correlated to a 2.2 percent drop in truss pricing.
Pressure-treated 4x4s dropped 5.9 percent with 2x4-treated lumber declining 3.4 percent.
Pockets frames decline 1.0 percent on lower wood costs.
Cement siding declines 2.3 percent on more aggressive pricing.
The problem for most mills and manufacturers is that labor and fixed costs are not declining and, in fact, continue to increase. These significant declines in wood commodities are creating substantial shortfalls in margin and profitability. With little relief in sight with regard to higher interest rates, many will choose to halt production.
Lastly, the United States hurricane forecast is being upped by many experts after the rapid intensification of Hurricane Beryl, and we are only weeks away from the peak of the season. If indeed, hurricane season is as bad as forecasted, the chance of these OSB and Plywood prices staying at this level will be low, plus, pressure on drywall and insulation could put those products in tight supply. Builders should be very wary of pricing this Fall’s projects at July’s pricing. In fact, be sure you have a price escalation clause in your contract in the event of a natural disaster.
We are heading into the dog days of summer- stay hydrated and cool.
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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