Decline in Industry Makes us Ripe for Innovation

By: Jim Moody, CAE
President

Ruth Kellick Grubbs, an industry consultant and a good friend of CSA’s, recently sent out a newsletter to clients with some harsh insights. Contrary to what I’m hearing from some economists and from other industry gurus, Ruth says there’s no recovery on the horizon for home building.

She cites several reasons to support her analysis:
• Statistics indicating home price increases may be misleading.
• The current low interest rates are not sustainable.
• The homebuyer tax credit will not last forever.
• FHA loans now makeup a significant portion of the market, and they are risky.
• Foreclosures are going to spike again, and so are subprime resets.

Different people can look at the same statistics and come to very different conclusions. Certainly Greg Brooks, another industry consultant, has a different perspective. We provide you with his insightful newsletter each month, and he has a much more positive view of the future than Ruth does.

But whether you think brighter days are just around the corner or not, Ruth makes another point that is interesting.

She says we are at a critical point in the life cycle of our industry. People who study these things have determined that industries typically go through birth, growth and then a decline. The length of the cycle may be different from industry to industry, but the pattern is generally the same. Once an industry hits a decline, there has to be an innovation or the industry eventually dies.

We know that our country will continue to need housing in the long run, so the industry is not likely to die. Instead, someone will find a better, cheaper or faster way to get the job done, and the rest of the industry will fall in line. What’s not known at this point is whether the innovation will keep independent dealers in the mix (although with a much changed business model) or cut us out entirely.

Ruth asserts that technology will have a much larger role in the industry going forward. She also sees major changes in the distribution model, since ours is the most expensive model in existence. She also notes that our existence depends on our customer’s ability to sell our products and services for us, and that’s probably not going to be true in the future.

I’ve seen a lot of information about how homes going forward will be smaller and less customized because cheaper will be better for consumers. If that’s true, then I wonder whether the future is in more manufacturing. Will wall panels be the next big thing? Will the dealers and the home builders essentially be the same company? I don’t have answers to those questions, but it is good food for thought. What do you think the innovation in our industry is going to be? Use our blog feature to post comments.

Meanwhile, one of our members brought a ProSales article on credit to my attention. The article talks about how dealers who aren’t diligent in credit are as guilty of sub-prime lending as the mortgage companies. Clearly credit issues have been significant for our members over the past two years. How you extend credit and manage collections will be critical in the recovery of business going forward. We’ve had a task force developing a guide to best practices in credit and collections this year, and it’s now if final production. Hopefully it will be a useful tool for you; we’ll let you know when it’s available. Here’s the link to the ProSales article

News You Can Use - Trends and Numbers

New US home sales rise 6.2 percent
By ALAN ZIBEL (Associated Press)
Sales of new homes rose more than expected last month to the highest level in more than a year as the housing market shows stability after its historic collapse.

The Commerce Department says sales rose 6.2 percent to a seasonally adjusted annual rate of 430,000 from an upwardly revised 405,000 in September. Economists surveyed by Thomson Reuters had expected a pace of 410,000. Read more.

Existing-Home Sales Jump 10.1%
By Big Builder Staff
The soon-to-expire $8,000 federal tax credit for first-time homebuyers sent sales of existing homes soaring in October, the National Association of Realtors reported Monday.

Sales of existing single family homes, townhouses, condominiums and co-ops surged 10.1% to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, up 23.5% from the same month last year. The NAR has not seen numbers like this since February 2007, when the annual pace was 6.55 million. Read more.

Building Material Reuse Can Pay Off
By Teresa Burney
It's happened to every builder--the windows you ordered are the wrong size and unreturnable so they sit in the warehouse for years.

And most every remodeler has shaken his head while hauling a perfectly nice set of cabinets to the landfill because the homeowner wants something different and he has no place to store them. Read more.


Builders in Atlanta Struggle to Survive
By Michelle E. Shaw, The Atlanta Journal-Constitution
When the housing market was white-hot, McCar Homes was one of the nation's leading builders.

In 2006, the Alpharetta-based company built and sold more than 2,200 homes and boasted revenues upward of $500 million. But now that the market temperature is in the Arctic region, McCar's chief executive isn't sure the company will make it into 2010. Read more.

Touched By Lumber: The World’s Most Famous Lumberyard OwnerA newly restored and remastered version of Gone With the Wind is out in Blu-Ray DVD format this Holiday season, reminding us all that Scarlett O’Hara exceeds even 84 Lumber’s Joe Hardy as the world’s most famous lumberyard owner. Scarlett, who built her business up from the ashes of a fire-ravaged, post-Civil War Atlanta, offers both good and bad management lessons for these hard times. She knew how to be tough--“The War Is Over: Don’t Ask for Credit,” one sign in her store reads. But hiring her unrequited love, the milquetoast Ashley Wilkes, to run the yard shows a serious fault in judgment. Oh well: at least when we watch the two clench in the lumberyard office, thanks to the new restoration we now can admire the moulding display in the background.

Photo courtesy of Warner Home Video.

News You Can Use

Product Information: Stanley and Blecker Decker to Merge
The Stanley Works and Black & Decker announced today they will merge to create Stanley Black & Decker, an $8.4 billion global tool company. The deal is worth $4.5 billion, the companies said in a joint news release. Read more.

September Construction Spending Up 0.08%
Construction spending in September posted a better-than-expected performance, powered by the largest jump in housing construction in more than six years.

The advance spurred hope that the battered housing sector is starting to turn around and will provide support for the overall economy as it struggles to emerge from the worst recession since the 1930s. Read more.

Employment costs rise at slowest pace since 1982
Employment costs rose by the smallest amount on record in the 12 months ending in September, as high unemployment restrained wage and benefit growth.

The data shows that employers face little pressure to raise pay, even as the economy recovers. The weak labor market makes it difficult for people with jobs to demand higher pay and benefits. Read more.

Have you seen EcoHome?

NLBMDA News

Pelosi Unveils House Health Care Bill
Last week, the Democratic House leadership unveiled their nearly-final draft health care reform bill. The bill makes some improvements to the employer mandate, by doubling the floor for penalties on small businesses for not providing health care benefits to employees and dependents. Previously, the penalties began at $250,000 in total wages; now, they begin at $500,000 in wages. Read more.

CPSC Issues Inconclusive Chinese Drywall Report
The Consumer Products Safety Commission (CPSC) last week issued a summary of its findings to date on the Chinese drywall investigation. An interagency task force, comprised of the CPSC, Environmental Protection Agency (EPA), Department of Housing and Urban Development (HUD), Centers for Disease Control and Prevention (CDC), Agency for Toxic Substance and Disease Registry (ATSDR) and state health departments have been coordinating research and governmental response to homeowners who have complained of health and metal and appliance corrosion in their homes. Read more.

OSHA Takes Initial Step Toward Combustible Dust Rule
The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) just published an advance notice of proposed rulemaking (ANPR) in the Oct. 21 edition of the Federal Register as an initial step in development of a standard to address the hazards of combustible dust. Read more.

Home Builder Confidence Dips in October
With the expiration date for an important home buyer incentive approaching, builder confidence in the market for newly built, single-family homes slipped one point to 18 in October, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
Read more.

News You Can Use

Economists Forecast Strong Housing Growth
Experts at NAHB conference see a turnaround occurring by mid-2010, but the way back will be long

By Craig Webb, ProSales Online

The U.S. housing market appears to have bottomed out and looks likely to return closer to normal--but not boom--levels by 2012, a group of housing economists predicted today.
Enthusiasm with several strings attached was the prevailing mood expressed in presentations prepared for the National Association of Home Builders (NAHB) 2009 Fall Construction Forecast Conference. Read more.

Housing Starts Hold Steady in September
Total housing starts, expressed as a seasonally adjusted annual rate (SAAR), came in at 590,000, according to data released today by the Commerce Department. That's 0.5% ahead of the previous month -- which was adjusted downward, from 598,000 to 587,000.
If not for the downward adjustment of August starts, the total percentage would have declined 1.3%.

There was better news for builders, and their suppliers, in the single-family front. Single-family housing starts in September were at a rate of 501,000; this is 3.9% above the revised August figure. Moreover, the August figure was revised upward, from a previously stated 479,000 to 482,000.

Compared with September of last year, total starts declined 28.2%, and single-family starts declined 8.7%. Read more.

September housing construction rises 0.5 percent
By Martin Crutsinger
Source: Associated Press/AP Online

Construction of new homes edged up slightly in September, helped by a rebound in single-family construction. However, in a worrisome sign for future housing work, applications for building permits fell by the largest amount in five months. Read more.

More Signs of Economic Recovery
The decline in consumer spending on home renovation projects is tapering off, and remodeling activity should start to pick up early next year, according to a just-released study by Harvard’s Joint Center for Housing Studies.

The quarterly forecast pointed to several positive signs that could boost home improvement spending, causing a reversal in annual declines by the second quarter of 2010. Read more.

Emerging Trends: Don't Put Me on Your Bid List!

By Steve OndichCommercial Forest Products

THIS year has been a rude awakening for many sales professionals. A few years ago, large sales were easily had. In 2009, reps are working twice as hard for smaller sales. Margins are also tight due to intense competition among companies that are willing to sacrifice profits for the sake of staying busy.
The good news is that unless you've traded in your Blackberry and drive-through Starbucks for a pork-pie hat and a place in the soup line, you're still in the game. The bad news is that you're far from alone.

Complaining about the bad economy is very 2008. The new water cooler rant is that there are too many companies competing for the same small pool of work. When 30 piranhas are stuffed into a 12-gallon tank, any morsel of food is quickly devoured-yet all of the fish remain hungry.
As salespeople, we can either accept mediocre results as an inevitable byproduct of the bad economy or we can find a way to distinguish ourselves from the mass of competition. Going back to the piranha analogy, there will not be enough food put in the tank this year. You want to be the lone fish that jumps and catches the morsel before it hits the water.

One easy way to elevate yourself is to get out of the "bid-list" mentality. Asking to bid jobs or be on someone's bid list is a weak, passive way to solicit business. An inanimate fax machine can be on a company's bid list. You're better than that. In a good economy, working this way yields mediocre results, and we're not in a good economy.

Here's why I don't like bid lists:
• You're not the only one receiving that request for quote (RFQ).
• Bid lists reduce everything down to price. If you have a premium product, your bid is going to look high when compared to an inferior product. It's extremely difficult to point out your product's superiority on a bid list.
• RFQs are often red herrings. Have you ever walked into a prospect's building and been surprised by some newly purchased materials despite having been erroneously assured that you're on the bid list?
• Bid sheets create the illusion of an even playing field. Buyers often have a preferred vendor in mind before they distribute RFQs. If you're not the preferred vendor, you have a few strikes against you from the start. The preferred vendor's bid only has to be in the ballpark. You may be the low bidder across the board and still not get the job. Low bids are rejected because "they're too low, something must be wrong." High bids are accepted because "it's not that much more, and we know what we're going to get." It's not spelled out on the RFQ, but it's a reality.
Here's what you can do:
• Get the order before it's put out for bid. If you can find out what projects are upcoming before the RFQs go out, you'll have the opportunity to sell before your competition becomes aware of the opportunity. Great sales pitches can easily be drowned out by dozens of mediocre ones. Don't wait. Pre-sell your products.
• Work to become the preferred vendor. If customers want to give you work, selling becomes exponentially easier. If you're a second- or third-tier vendor, don't assume that you can bid your way to the top tier. Find out why your competition is getting the lion's share of the work. Nine times out of 10, you'll be told it's price. It's probably not.
Think about it. If you're a purchasing agent, are you going to admit that you prefer one vendor because he lets you use his condo in Palm Springs every year or because the owner likes him? No, you'll give a less accurate, but more respectable answer ("His prices are lower"). Find out what makes your customer tick, then you can decide how to improve your relationship, or if you even want to.
• Find out what's important to your customer so you can bid accordingly. Don't assume all of the important specs are on the bid list. Maybe you'll be the only vendor quoting product that hits all of their specs. Make sure they know it.
• Find a good reason to stay on your customer's radar. Repeatedly calling to ask, "Do you need anything?" or "Are you ready to order?" keeps you on their radar, but not in a good way. "I've got a good idea that should save you some money" is a call that your customers will want to take. A busy purchasing agent will often bypass the bid process and give an order to a rep who happens to be on their radar when a job is released. Contact them often, but make sure you have a worthwhile purpose or you'll be put on the dreaded straight-to-voicemail list.

As a hardwood vendor, my goal is to solve problems and present opportunities to my clients. A proactive approach often gives me the first-and sometimes the only-look at new business.

- Stephen Ondich is the owner of Commercial Forest Products, Fontana, Ca., a manufacturer and distributor of hardwood products. He can be reached at (909) 256-4583 or sondich@commercialforestproducts.com.

News You Can Use - Trends and Numbers

Survey: Boomers Want Single Level, Energy-Efficient Homes in the Suburbs
A new survey reveals that 55+ Americans would prefer suburban living in single-story homes with amenities, particularly high-speed Internet access, for their later years, and they don't consider "universal" design a priority. These are some of the findings from 55+ Housing: Builders, Buyers, and Beyond, a survey conducted by the National Association of Home Builders (NAHB) and the MetLife Mature Market Institute, which asked owners and renters about their current homes and the types of homes, communities and features they prefer as they age. Read more.

Overall Housing Starts Rise 1.5 Percent in August
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 598,000, 1.5 percent higher than July figures, according to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development. Single family starts, however, fell 3 percent to a seasonally adjusted rate of 479,000.

NAHB blamed the pullback in single-family starts on the looming expiration of the $8,000 tax credit for first-time homebuyers. Read more.

NLBMDA News - Builder Confidence Edges Up in September

Builder confidence in the market for newly built, single-family homes edged higher for a third consecutive month in September, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released last week. The HMI rose one point to 19 this month, its highest level since May of 2008.

"Today's report indicates that builders are starting to see some glimmers of light at the end of the tunnel in terms of improving sales activity," said NAHB Chief Economist David Crowe. "However, the fact that the HMI component gauging sales expectations for the next six months slipped backward this month is a sign of their awareness that this is a very fragile recovery period and several major hurdles remain that could stifle the positive momentum. Those hurdles include the impending expiration of the $8,000 tax credit as well as the critical lack of credit for housing production loans and continuing problems with low appraisals that are sinking one quarter of all new-home sales. These concerns need to be addressed if we are to embark on a sustained housing recovery that will help bolster economic growth." Read more.

News You Can Use - Trends and Numbers

Consumer Confidence Index Rises in August
The Conference Board Consumer Confidence Index®, which had retreated in July, rebounded in August. The Index now stands at 54.1 (1985=100), up from 47.4 in July. The Present Situation Index increased slightly to 24.9 from 23.3 last month. The Expectations Index improved to 73.5 from 63.4 in July. Read more.

New Homes Sales Surge 9.6 Percent in July
Sales of new one-family houses in July 2009 were at a seasonally adjusted annual rate of 433,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.6 percent above the revised June rate of 395,000, but is 13.4 percent below the July 2008 estimate of 500,000.

The median sales price of new houses sold in July 2009 was $210,100; the average sales price was $269,200. The seasonally adjusted estimate of new houses for sale at the end of July was 271,000. This represents a supply of 7.5 months at the current sales rate.

Architecture Billings Index Bounces Back in July After Substantial Dip
Exhibiting a welcome rebound following a 5-point dip the month prior, the Architecture Billings Index (ABI) was up almost 6 points in July. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the July ABI rating was 43.1, up noticeably from 37.7 the previous month. This score, however, still indicates a decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score fell to 50.3 from 53.8, but it was the fifth straight month with a score in above 50. Read more.

Existing Home Sales Up 7.2 Percent in July
For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005. Read more.

News You Can Use - Trends and Numbers

Homeowners Turning to Phased Remodeling Due to Down Market, Says NARI
Residential remodels are no longer those once-in-a-lifetime projects that keep homeowners dreaming years on end before they ever pick up a hammer. Instead, many homeowners opt to do a series of remodels as their schedules, budgets and lifestyles evolve over time, according to the National Association of the Remodeling Industry (NARI).

In fact, according to a recent Consumer Reports poll on home remodeling, 36% of homeowners who plan to remodel plan to do so in phases. Read more.

Builders Ask Congress To Extend and Enhance Home Buyer Tax Credit
To help create jobs and set the stage for a strong recovery, the National Association of Home Builders (NAHB) today called on Congress to extend and enhance the $8,000 first-time home buyer tax credit due to expire on December 1.

Specifically, NAHB is asking Congress to extend the home buyer tax credit program through November 30, 2010 and make it available to all buyers of principal residences. Read more.

Consumer Satisfaction With Windows and Patio Doors Declines, According to Latest J.D. Power and Associates Report
As economic difficulties lead homeowners to curtail remodeling projects, overall satisfaction among consumers with windows and patio doors has declined in 2009, according to the J.D. Power and Associates 2009 Windows and Patio Doors Satisfaction Study(SM) released today. Read more.

AIA Study Estimates up To 270,000 Construction Industry Jobs Could be Created if American Clean Energy Security Act is Passed
The American Institute of Architects (AIA) conducted a study to determine how many jobs in the design and construction industry could be created if the American Clean Energy Security Act (H.R. 2454; also known as the Waxman-Markey Bill) is enacted. The study analyzes two provisions included in the House-passed Act, the State Energy and Environment Development (SEED) program and the Green Resources for Energy Efficient Neighborhoods (GREEN) program. Using studies that measure the extent of job creation in the building industry, the findings estimate that as many as 270,000 jobs could be created or saved if the building-related provisions in H.R. 2454 become law. Read more.

More Signs of Hope for Housing Market

The S&P/Case-Shiller Index, a leading barometer of the U.S. housing market, recorded a slowing of the rate of decline for existing-home prices for May 2009. This is the fourth consecutive month that both the 10-city and 20-city composites showed improvement, which is being heralded as a possible turnaround for the stalled real estate market. Read more.

NLBMDA News - Home Builder Confidence Gaining in July

Home builder confidence in the market for newly built, single-family homes notched up two points in July to its highest level since September 2008, according to the recently-released National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI rose two points to 17 in July as builders saw an improvement in current sales conditions but continued to express concerns about the future. Read more.

News You Can Use - Trends and Numbers

Movement To Expand Home Buyer Tax Credit Gains Steam
Some federal bills would increase amount available for all buyers. But budget deficits raise questions about the extent of state programs, particularly in California.

Source: BUILDER Online

By John Caulfield
Pressure on lawmakers to extend and increase the federal tax credit for home buyers has intensified in recent weeks. Congressional committees are now weighing no fewer than seven housing tax credit-related bills. Prominent business groups have lent their support for such measures. And governors of several states have authorized their own tax credits or advances on the federal credit. So far, though, only lawmakers in California have indicated they'd like to see their state's largesse extend beyond this year. Read more.

Market Recap: RISI Crow’s House Residential Framing Index

A price index of lumber and panels used in actual construction for June 26, 2009
*Western - regional species perimeter foundation; Southern - regional species slab construction.
Crow's Market Recap -- A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow’s Weekly Market Report. Read more.

Builders Indicate 'Cautious Optimism'
Sales, traffic improving even in move-up and active adult markets

Source: BUILDER Online

By Alison Rice
The mood of the moment for builders? Cautious optimism. At the Jones Company of Tennessee, traffic has improved in May and June compared to the early months of 2009. "We are cautiously optimistic," said Bridget Wright, marketing director for the Franklin, Tenn.-based firm. Read more.

Poised for a Comeback
The window industry's annual market report contains both good news and bad

Source: REPLACEMENT CONTRACTOR Magazine

With housing starts down in double digits for 2008, the window industry could hardly expect to be booming. And guess what? It's not.The recently released "2008/2009 AAMA/WDMA U.S. National Statistical Review and Forecast," a numbingly thorough examination of the door, window, and skylight industry's trends and prospects, found little to celebrate. Read more.

Existing-Home Sales Rise in May
Sales of existing homes showed another gain in May, benefiting from favorable affordability conditions and a first-time buyer tax credit, according to the National Association of Realtors®. May's increase was the first back-to-back monthly gain since September 2005.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.4 percent to a seasonally adjusted annual rate1 of 4.77 million units in May from a downwardly revised level of 4.66 million units in April, but remained 3.6 percent below the 4.95 million-unit pace in May 2008. Read more.

Harvard's 2009 State of the Nation's Housing Report Sees Challenges to Recovery, But Strong Future Demand
The worst housing downturn in generations continues to grind on, finds a study released today by the Joint Center for Housing Studies of Harvard University. Despite some stabilization in homebuilding and home sales in the spring, real home prices continued to fall and foreclosures mount in most areas in the first quarter of the 2009. With mortgage interest rates heading higher in June and the economy still contracting, a sustained recovery for housing still faces an uphill climb. “Although there are some signs of improvement or at least steadiness in new construction and sales,” says Nicolas P. Retsinas, Director of the Joint Center, “housing starts stand near 60+ year lows and any life in home sales is coming from distressed foreclosure sales, temporary first-time buyer tax credits, and low interest rates that moved higher in recent weeks.” Read more.

New Home Sales Fall in May
Sales of new one-family houses in May 2009 were at a seasonally adjusted annual rate of 342,000, 0.6 percent below the revised April rate of 344,000, according to estimates released by the U.S. Census Bureau. The performance is 32.8 percent below the May 2008 estimate of 509,000. Read more.

News You Can Use - Trends and Numbers

Market Recap: RISI Crow’s House Residential Framing Index
A price index of lumber and panels used in actual construction for June 19, 2009
*Western - regional species perimeter foundation; Southern - regional species slab construction.
Crow's Market Recap -- A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow’s Weekly Market Report. Read more.

Despite Programs, Stabilzing Housing Market May Prove Difficult, Officials Warn
Source: The Philadelphia InquirerPublication date: June 21, 2009
By Alan J. Heavens, The Philadelphia Inquirer

Government officials and other observers agree that the U.S. housing market cannot recover until the foreclosure crisis is solved and a regulatory system is put in place that ensures no repeat of the lending debacle that caused it.

Yet the remarks of Obama administration officials and consumer advocates at a conference of real estate writers and editors here suggest that the very depth of the crisis means a resolution is far from close in coming. Read more.

State of the Nation's Housing
A study released today by the Joint Center for Housing Studies of Harvard University finds that the housing downturn -- the worst in generations -- continues to grind on.

The positive news is there has been some stabilization in home building and home sales in the spring. Also, long-term demographics for future demand are strong. But real home prices continued to fall, and foreclosures mount in most areas in the first quarter of 2009. With mortgage interest rates heading higher in June and the economy still contracting, a sustained recovery for housing still faces an uphill climb, according to the report.

“Although there are some signs of improvement or at least steadiness in new construction and sales,” said Nicolas Retsinas, director of the Joint Center, “housing starts stand near 60+ year lows, and any life in home sales is coming from distressed foreclosure sales, temporary first-time buyer tax credits, and low interest rates that moved higher in recent weeks.” Read more.

Dealers Surge in Popularity Among Small Remodelers
HIRI study finds LBMs now top big boxes, but the economy may be warping the results
Source: PROSALES Information ServicePublication date: 2009-06-22
By Craig Webb

LBM operations nosed out big-box stores to become the preferred shopping source for small, general-service remodelers in 2008, a new study by the Home Improvement Research Institute (HIRI) finds. But the study's author believes the economic slump figured heavily in the swing, and he notes that specialty remodelers continue to rank LBMs fourth in popularity behind wholesalers, specialty suppliers and the big boxes.

HIRI based its just-released findings on a telephone survey earlier this year of 538 general and 1,203 specialty remodelers. The poll also carved out results from 100 Hispanic-owned general contractors, who unlike their non-Hispanic counterparts tended to be much more loyal to the big boxes.

'Vanilla' home loans could benefit borrowers
Source: Associated Press/AP
By ALAN ZIBEL

If President Barack Obama gets his way, consumers who take out mortgages would automatically get a "plain vanilla" loan - such as a traditional 30-year fixed-rate mortgage - unless they opted for a riskier variety.

Obama's plan to revamp financial regulation aims to protect borrowers from the confusing and high-risk mortgages that fed a pandemic of delinquencies and foreclosures, led to the worst financial crisis in decades and thrust the nation into a deep recession.

Obama is expecting opposition to the plan, and cautioned Saturday in his radio address, "While I'm not spoiling for a fight, I'm ready for one."

Government officials want to make the process of getting a mortgage as simple and abuse-free as signing up for a retirement savings plan: A growing number of companies now automatically enroll new employees in 401(k) plans unless they opt out. Read more.

Fed unlikely to try new aids for economy, for now
Source: Associated Press
By JEANNINE AVERSA

With the recession easing, Federal Reserve policymakers are unlikely to launch any major new efforts to revive the economy when they meet this week. Instead, Fed Chairman Ben Bernanke and his colleagues, wary of overdoing the stimulus medicine and fanning inflation later, are expected to stand pat, economists say.

The Fed has taken unprecedented steps to try to lift the country out of recession. They include a bold effort announced in March to plow $1.2 trillion into the economy in an attempt to lower interest rates and spur more spending by Americans.

"There are a lot of good signs that an economic recovery could get under way later this year, and with inflation currently low, the Fed for now has the luxury of sitting back and watching this recovery unfold," said John Silvia, chief economist at Wachovia. Read more.

News You Can Use - Trends and Studies

Survey Sets Median Pro Dealer's Margin at 26.62%
Last year's median pretax profit was just 0.62%, latest Cost of Doing Business Report finds
Source: PROSALES Information ServicePublication date: June 16, 2009
By Craig Webb
The median pro-oriented building material dealer posted a gross margin of 26.62% and a pretax profit of just 0.62%, the 2009 Cost of Doing Business Report (CODB) reveals. Read more.

Housing starts climb in May
(Jun. 16) After receiving disappointing housing-starts stats for March and April, the industry received some good news for May, when starts jumped 17.2% to a seasonally adjusted annual rate of 532,000, according to data released Tuesday by the Department of Commerce. Single-family starts increased 7.5% to a rate of 401,000 -- cracking the 400,000 mark for the first time since November 2008.

The numbers looked good compared with April's all-time low rate of 458,000, however, both metrics are well below a year ago. Total starts were down 45.2%, and single-family starts were down 40.9%, compared with May 2008. Read more.


Builder Confidence Slips One Point in June
NAHB says housing market and economy are "fragile."
Source: BUILDER OnlinePublication date: June 15, 2009
By Alison Rice
Builders' confidence in the housing market wobbled in June, according to the NAHB/Wells Fargo Housing Market Index (HMI) released today.

The monthly index, which measures builders' assessment of buyer traffic as well as current and future sales, dipped one point this month to a reading of 15. "As expected, the housing market continues to bump along trying to find a bottom," said David Crowe, NAHB's chief economist, in a statement. Read more.

Retail sales down 4.7% from last year
(Jun. 11) According to the National Retail Federation, retail industry sales for May (which exclude automobiles, gas stations and restaurants) increased 0.2% seasonally adjusted from April but dropped 4.7% unadjusted over last year.

May retail sales released today by the U.S. Commerce Department show total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) increased 0.5% seasonally adjusted over April and decreased 11.1% unadjusted year-over-year.
“With no direct stimulus for consumers this year, retailers were left with tougher comparisons, making May retail sales appear weak,” said NRF chief economist Rosalind Wells. “However, a slight sales increase from April provides hope that the economic turnaround may not be that far off.” Read more.

New Index Foresees Recession's End
Source: USA TODAYPublication date: June 11, 2009
By John Waggoner
The recession likely will end in September and be followed by a mild recovery, according to the new USA TODAY/IHS Global Insight economic outlook index.

But despite Federal Reserve Chairman Ben Bernanke's recent talk of the economy's "green shoots," few are confident prosperity is near. And the Fed's "beige book" report released Wednesday, a look at the nation's regional economies, says that the economy remained generally weak in April and May. Read more.

Foreclosure Rate Dips in May
Source: USA TODAYPublication date: June 11, 2009
By Stephanie Armour
The pace of foreclosures remains at a historic high and mortgage demand is tumbling as interest rates climb, reflecting a wobbly housing recovery that could falter if rates continue to rise.

While foreclosure filings dipped 6% in May compared with a month earlier, the overall pace of foreclosures was still the third-highest month on record, according to a report today from RealtyTrac. Foreclosure filings were reported on 321,480 homes during May, an increase of 18% from May 2008. One in every 398 homes received a foreclosure filing last month. Read more.

News You Can Use

TRENDS, NUMBERS, REGULATORY ITEMS

AP Stress Index confirms easing of recession
Source: Associated Press/AP OnlinePublication date: June 8, 2009
By MIKE SCHNEIDER and JEANNINE AVERSA

The recession's grip appears to be loosening as seasonal hiring picked up this spring. That's the conclusion of the Associated Press' monthly analysis of the economic pain in more than 3,100 U.S. counties.

The latest results of the AP's Economic Stress Index show the free fall that marked the autumn of 2008 and winter of 2009 gave way in April to a more controlled descent, possibly even a bottom. Still, the analysis found that pain remains high compared with year-ago levels. Read more.

Builders Fear Consequences of New Appraisal Law
Source: BIG BUILDER NewsPublication date: June 8, 2009
By Sarah Yaussi

It's been little over a month since the switch was flipped on the Home Valuation Code of Conduct (HVCC), and many builders are still unsure as to what the new rules mean for their business. However, many believe any regulatory change spells disruption.

The new code, a pet project of former HUD secretary Andrew Cuomo, was an attempt to secure the independence of real estate appraisers, who, say the code's supporters, have been under continual pressure from lenders, mortgage brokers, real estate agents, and even home builders to inflate values. Under the new code, lenders have set up firewalls between their loan departments and their either internal or third-party appraisal services if they wanted be able to sell the loans on the secondary market to either Fannie Mae or Freddie Mac. Read more.

A Housing Recovery: Not So Fast
Source: Business WeekPublication date: June 8, 2009
By David Bogoslaw

Stocks of homebuilders have had an impressive run recently, thanks to a stream of improving macroeconomic data, including home sales and consumer confidence, climbing an average of 38% since March 9. But will the recovery last? Recent gains in long-dated U.S. Treasury yields augur rising mortgage rates, while the likelihood of increasing foreclosures could further bloat the housing supply in the months ahead. Read more.

U.S. Lumber Production Falls 28% in 1Q09
Source: PROSALES Information ServicePublication date: June 5, 2009

Lumber production across the United States in the first quarter fell 28.3% from the year-earlier period to total 5.47 billion board feet, the Western Wood Products Association (WWPA) reported. Meanwhile, production in Canada slid 24.9% in the same period to total 4.64 billion board feet. Read more.

HUD revises rules for stimulus money
Source: Associated Press/AP OnlinePublication date: June 3, 2009
By KEVIN FREKING

Federal officials have lowered the threshold that the nation's public housing agencies must meet to get some of the stimulus money set aside for new roofing, plumbing and other renovations. Read more.

Why ProBuild scares me (and should scare you, too)

By Jim Moody, CAE
CSA President

The May issue of ProSales is a great one. Not only does it contain the ProSales 100, it also features an insightful cover story on ProBuild Holdings.

ProBuild, for those of you who don’t have them in your market (yet), is the largest LBM dealer in the nation. They are an amalgamation of several other dealers such as Hope and HD Supply (which itself had purchased Williams Brothers). Based in Denver, ProBuild is owned by a division of Fidelity Investors.

In my opinion (which I know is shared by many others who are more knowledgeable than me), ProBuild is the large national monster that will be around to compete with independents in the long run. Unlike 84 Lumber, Stock and Builder’s First Source, ProBuild seems to be well managed AND have deep pockets. (Stock has deeper pockets today than it did just a few weeks ago with an investment group taking a majority ownership, but it remains to be seen whether the new owners can manage the company any better than the old ones. At a minimum, Stock is a much smaller entity than it once was.)

One reason that I worry most about the competition ProBuild will bring is that I’ve met the CEO, Paul Hylburt. Paul is the current chair of the National Lumber and Building Material Dealers Association (aka NLBMDA, “the association with too many letters in its acronym”). I’ve had the privilege of seeing how he operates, and I’ve been fortunate to have dinner with him. He’s an impressive fellow. He’s humble, which I think is a key factor in leadership today. He knows the industry (Wicke’s, PrimeSource and Strober are on his resume). He’s surrounded himself with very smart people, though he’s not short in the smarts department himself. And he’s likeable. In fact, he reminds me of many of you.

Paul and ProBuild have been spending much of their time creating a unified corporate culture and system of processes among all their acquisitions. They are close to achieving that goal. (Their technology system is going to be a competitive advantage – more about that next week.) Even while trying to wrangle all those companies into one, they’ve managed to be the top dog in our pound – by almost a billion dollars. What will they be able to do when their focus really becomes selling building materials?

When I talk to dealers about competing with the national groups, I hear a common refrain: They focus on price. Our price may be a little higher, but for our customers, service is as important as price. If we can stay in the same area on price and provide better service, we can handle the national chains’ competition.

ProBuild has the ability to make a market very price-oriented. It’s tough for a small independent (and they are all small compared to ProBuild) to win when the whole conversation with a builder is about price. But what scares me the most is that with strong leadership in place, they may well have the ability to provide service equal to that of the small independent AND do it at a lower price. What happens if ProBuild “gets it right” and they are not satisfied with simply serving production builders?

Time will tell. Many of you have been through this kind of thing before (“Home Depot and Lowe’s will kill the independent dealer”) and it didn’t come to pass. I am certainly not predicting the end of the universe as we know it – I believe that has already happened. Instead, I’m giving you a heads up that if you have a ProBuild yard near you, you should not assume that their level of penetration in your market is going to remain the same. And if you hear that ProBuild is opening a yard near you, you better be ready to play because the game will be on.

News You Can Use

Gov't expands housing plan, off to slow start
Source: Associated Press/AP OnlinePublication date: May 14, 2009
By ALAN ZIBEL

For the past two months Rose Inman hoped she could benefit from President Barack Obama's plan to help homeowners avoid foreclosure. Now it appears to be too late.
Aurora Loan Services is set to foreclose on her home overlooking Seattle's Puget Sound on Friday. Despite numerous calls, e-mails and letters, she says she's only been able to have one phone conversation with a company representative. Read more.



75% in Survey Think Worst is Over in Housing Slump
Source: The Dallas Morning NewsPublication date: May 14, 2009
By Steve Brown, The Dallas Morning News

Three out of four U.S. homeowners think the worst is over in the housing market.
And half of the homeowners in Southern states -- including Texas -- say home prices will stabilize in their areas in the next six months, according to a new survey by Zillow.com.
Researchers for the Internet real estate marketing company quizzed almost 1,400 homeowners around the country in early April about where they thought the housing market was headed. Read more.

From the National Association of Credit Managers (NACM)
FTC Releases "Red Flags" Template for Entities That Have Low-risk of Identity Theft
To help entities that have a low risk of identity theft – such as businesses that know their customers personally – the Federal Trade Commission has created a template that guides such businesses and organizations in developing written identity theft prevention programs to comply with the Red Flags Rule. “Create Your Own Identity Theft Prevention Program: A Guided 4-Step Process,” is available at www.ftc.gov/bcp/edu/microsites/redflagsrule/get-started.shtm. The template has guidance and instructions that enable companies to complete and print the fill-in-the-blank form online. Under the Fair and Accurate Credit Transactions Act of 2003, the Rule requires many businesses and organizations to implement a written Identity Theft Prevention Program to detect the warning signs (“red flags”) of identity theft. By identifying red flags, these entities will be in a better position to spot an imposter trying to defraud them by using someone else’s identity to get products and services.

Find templates here.

News You Can Use

Remodeler-Focused Dealer Rises From Ply Mart's Ashes
Georgia's Mahaffey brothers are back in business with PMC Building Materials
Source: PROSALES Information ServicePublication date: May 13, 2009
By Andy Carlo
Have you wondered what ever happened to Randy and Rich Mahaffey, the Georgia brothers who led Ply Mart when it became ProSales' Dealer of the Year in January 2007 and were pretty much out of business 18 months later? Like Atlanta's symbol, the phoenix, the Mahaffeys have returned to the construction supply business as the force behind PMC Building Materials in Marietta, Ga. Read more.

Slide in U.S. Home Prices Slows in March
Integrated Asset Services, LLC, a leading provider of end-to-end mortgage services solutions, today released its latest IAS360™ House Price Index. Based on the timeliest and most granular data available in the industry, the benchmark index showed national house prices falling another 1.0% in March.

The March numbers come on top of a 3.0% drop in February and a 3.5% plunge in January, the index's worst single-month decline ever. On a year-over-year basis, U.S. house prices are now down 13.9%, with a full 10.7% coming since September when the economy began unwinding. IAS360 reports prices down 17.7 % from the height of the real estate bubble in 2006. Read more.

Evidence piling up that worst of recession is over
Source: Associated Press/AP OnlinePublication date: May 8, 2009
By JEANNINE AVERSA

Evidence is piling up that the worst part of the recession has ended. But that doesn't mean the pain is over.

A better-than-expected unemployment report Friday - job losses declined to the lowest level in six months - capped a week of encouraging news, including firmer home sales, a revival in consumer spending and fresh optimism about the biggest U.S. banks. Read more.

Professional Remodelers Key To Earning Energy-Efficiency Tax Credits
Homeowners now can claim up to $1,500 in expanded energy-efficiency tax credits for remodeling their principal residence to reduce energy consumption. Available until the end of 2010, the revamped Existing Home Retrofit Tax Credit (25C) tax credit helps consumers save two ways: on their costs and on their ultilty bills.

"Remodelers can help find the best methods of saving energy in your home with an assessment, like a home energy audit," explained NAHB Remodelers Chairman Greg Miedema, CGR, CGB, CAPS, CGP, a remodeler from Tucson, Ariz. "Tightening the house to reduce air leakage by adding insulation, fixing ducts, and installing a more efficient heating and air conditioning system can help save on energy bills today while also reducing next year's tax bill." Read more.

There will be wind: Hurricane forecast sees increase in 2009
The upcoming 2009 hurricane season is expected to be more active than average, according to an expert forecast.

The number of named storms from June 1 to Nov. 30 -- the official hurricane season -- is expected to be 12, compared with the average of 9.6. The findings were announced at the Honeywell Generator booth (#33334) during the National Hardware Show.

Of six major measurements of hurricane activity, four are expected to surpass historic averages. The only metric where a decline in activity is forecast is "intense hurricanes," which is forecast at 2, down from 2.3. Read more.

National Geographic Debuts Line Of Energy-Efficient Hybrid Outdoor Lighting
National Geographic has introduced a new line of energy-efficient outdoor lighting, called the Preserve Our Planet Hybrid Lighting Collection. The collection is available exclusively at LAMPS PLUS, the nation's largest specialty lighting retailer. With green features that enhance the quality of the lamps, the collection offers an eco-friendly solution to outdoor lighting, as it promotes energy conservation, home safety and cost-efficiency. Read more.

LP Recalls Composite Decking
Source: PROSALES Information ServicePublication date: May 13, 2009
By Craig Webb

Louisiana-Pacific Corp. (LP) has launched a voluntary recall of 48 million linear feet of composite decking that can deteriorate prematurely and unexpectedly break, the federal Consumer Products Safety Commission (CPSC) announced today. Read more.

Putting the Green in Green

By Jim Moody, CAE
President, Construction Suppliers Association

Until recently, I’ve thought about “green building” when I couldn’t fall asleep. Worked better than Sominex. The subject has been a non-starter with dealers I’ve talked to. The most common comment I got when I broached the subject was “I’ve never had a customer come in and ask for anything green.”

I suspect we’ve all regarded “green” as something for the tree-hugging leftists out West, but we always knew that it would creep eastward. Just not today. But, in the past three or four months, I’ve noticed an uptick in the questions I’ve gotten about green building. It’s prompted me to do some research and even to attend a green building forum held (appropriately) on St. Patrick’s Day.

I walked in thinking I was somewhat ignorant on the subject. What I learned was that pretty much everyone is ignorant on the subject because there just isn’t much “there” there. For instance, there is no real, accepted definition for green building. Ask a thousand people, and you’ll get a thousand answers. Ultimately, just like beauty is in the eye of the beholder, green building will be whatever your customer thinks it is – once he decides that green is indeed what he wants.

And that time may be sooner than we think. I was surprised to learn that Atlanta was sixth in market demand for green products, behind only California, New York, Colorado, the Pacific Northwest and Austin. It was my impression that there was no market demand in Atlanta for any products, much less green ones. But, there must be some demand, or Atlanta wouldn’t have been on the list (unless it was accidentally mixed with the list of most foreclosures).

The Greater Atlanta Home Builders developed a program to push green housing called EarthCraft Homes. The developer in my neighborhood changed builders about a year ago, and the new builder put up big signs touting EarthCraft. Perhaps that’s a big driver for green in the Atlanta area. Of course, not one of those lots has sold, but that’s another sad story for another day.

So let’s assume demand is knocking on our doorsteps. All that certification/chain of custody stuff is so confusing. What should we do?

The first thing I would suggest you do is focus your green thoughts on products other than lumber. In LEED certification, which is the standard for now, certified lumber gets a builder as much credit as putting in a bike rack (and yes, I mean that literally). In other words, it’s just not worth the trouble or expense. I’m hearing that customers may ask you to include certified lumber in your bid and then it quickly gets value-engineered out.

If you want to provide certified lumber, you have to get a chain-of-custody certificate. This can cost several thousand dollars. If you’ve already got one, good for you. Let’s hope the business is there for you to see a return on that investment. If you don’t have a chain-of-custody certificate today, it might be something that can wait for better times and a bigger market demand.

So if you aren’t focusing on the lumber, what should you think about? Anything that is sustainable, toxin-free, waste-reducing (yes, trusses are inherently green), energy-saving, water-saving, etc. You already sell many products that are considered green, and many of those are higher-end products. The key is for you to market them effectively to drive demand for these. You’ll be helping the environment, but it can also improve your bottom line.

It seems to me that at least for now, we need to view green as an opportunity to upsell rather than as a list of onerous rules and regulations that are difficult to understand. I grant that you may not have had any customers ask for green when they walked in the door. But you also probably have not had customers walk in and ask for your most expensive line of products, yet you have certainly upsold many customers by touting the benefits of your higher-end products. I submit to you that “green” is just one more way to convince customers to go beyond the basic product lines. Treat green as the friend, not foe.

There are a couple of resources that can be helpful as you consider how heavily you want to market green products. CSA is a partner in the Certified Green Dealer program, developed by LBM Journal. The focus of this program is educating your sales people on green products so that they can honestly and effectively communicate the benefits of green to your customers. Visit http://www.certifiedgreendealer.com/ for more information.

Also, BlueLinx has launched a sustainability program and portfolio of “ecoproducts” called PureBlue. This is not a paid commercial, and there are probably similar programs from other providers, but this is the one I’m most familiar with. You can find more information here. They also have a presentation called “Making Sense of Green” that is interesting and enlightening. You can request a copy from Shiloh.kelly@bluelinxco.com.

So here’s the bottom line: Green is coming, whether we want it or not. You can choose to ignore it and find yourself behind the times, or you can embrace it. When you embrace it, you may find that it’s not as complex or difficult to implement as you first thought. It may simply be an additional way to market your products, and it very well could help you push customers to higher-end and higher-margin items.