By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) for October increased 3.1 percent to $421.09 per thousand as the overall housing market starts to show signs of life after the Federal Reserve’s half-point interest rate drop. Interestingly, the impacts of the 3 major hurricane strikes in the last 3 months have done little to move pricing as rebuilding has not begun in earnest and each month has resulted in lost production days for builders. In November, overall material movement could increase as pent-up demand and rebuilding efforts collide with a market that is improving.
The lumber portion of the Index increased 2.9 percent with most spruce items trading at mixed levels from down 2.3 percent to up 5.2 percent. 2x6 spruce was solidly up $10 to $25 per thousand, but for the most part, the cost increases were driven by specific size availability. Dimensional pine was a different story altogether. Wide width 2x12 pine was up 12.0 to 18.4 percent and 2x4 pine added 8.0 percent. Mill closures and curtailments coupled with mill downtime and lost timber in the forest are pressuring those markets. The number of treated docks lost on the West Coast of Florida should fuel demand over the next few quarters.
For the first time in months, the sheathing market of the Index was firmly up, with OSB adding $15 per thousand and CDX pine adding $15 per thousand. The sheathing portion of the Index increased by 3.2 percent, and this could be the initial precursor of a market beginning to move higher.
The biggest worry for builders for production over the next quarter must be labor. With the damage and cleanup from the hurricanes, builders and contractors will be competing for a dwindling number of available workers. The government will be hiring thousands for cleanup and rebuilding, and this pressure on labor, especially in Florida which implemented tough immigration legislation last year, could really impede home construction production. Builders should build in their modeling longer build times for projects as well as higher costs for materials. In short, the projects and work could be available, but getting it done may be the biggest obstacle.
Happy Halloween, and let’s hope labor and pricing doesn’t get too scary.
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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