Bernanke to builders: More needs to be done
Orlando, Fla. — Federal Reserve Chairman Ben Bernanke, addressing a crowd of home builders on the last day of the International Builders’ Show here, did his best to explain how low mortgage rates — his chief weapon to stimulate the housing market — have fallen short of their goals. But Bernanke’s speech before a crowd of more than 200 attendees was not an apologie; on the contrary, Bernanke seemed a little frustrated about a lack of action in other government and business sectors and seemed worried about the overall effect of the housing crisis on the general economy.
“One of the effects of the decline in housing worth is to reduce the ability and willingness of households to spend,” Bernanke said. Underwater borrowers may have trouble paying for emergency health expenses, financing their children’s educations, or moving to a new location for a job opportunity because they can’t sell their current house.
“The state of housing and mortgage markets may be holding back the recovery of our financial system and the normalization of credit conditions,” Bernanke said. Although he acknowledged that lax lending standards helped precipitate the housing meltdown, now “the pendulum has probably swung too far in the other direction.” Current lending practices have been denying mortgages to creditworthy houses, even those who meet the standards of Government Sponsored Entities (GSEs). Private-label mortgage securities and their loan have virtually disappeared, Bernanke said.
“Lending to first-time home buyers has dropped precipitously,” he said, noting the ripple effect on move-up homebuyers.
With one-fourth of the excess supply of vacant homes for sales in the second quarter of 2011 owned by banks and other creditors — commonly referred to as REO properties — Bernanke worried that these homes will continues to exert downward pressure on home prices. The Feds estimate that an additional one million more foreclosure homes could be added to the REO pile over the next few years. In a “white paper” released last month, Bernanke’s staff outlined several proposals to get these homes off the market, converting them into rentals or turning them over to non-profit “land banks.” An REO-to-rental pilot program is currently under way, and the Feds have identified six other metro areas — Atlanta, Detroit, Las Vegas, Chicago, Phoenix, and Riverside, Calif. — where the concept could work.
In a question-and-answer session with the audience, Bernanke was asked how much he, as Federal chairman, could do to move forward on his ideas. The answer: Congress, the FHA and other government agencies will have to implement (or not) the proposals he put forth in his 26-page white paper called. “The U.S. Housing Market: Current Conditions and Policy Considerations.”
“Our goal was to put out there some main issues for people who have to make these decisons, and to make people realize how central to the economy housing is,” Bernanke said.
Bernanke’s staff is also communicating to the banks that now is not the time to be stingy.
“As regulators, we have been very clear to the banks that we do not want them to turn away creditworthy borrowers, and that includes home builders,” Bernanke said.
The NRLA tips its hat to regional leaders
A memorable roll call of northeastern lumber industry leaders was a highlight of one of the country’s premier lumber-industry events: the Northeastern Retail Lumber Association’s LBM EXPO.
The three-day Expo held last month at Foxwoods in Connecticut offered the usual interaction between vendors and northeastern dealers, and an extra dose of recognition for the people who make the NRLA one of the strongest regional associations in the country. NRLA chair Rita Ferris introduced the Lumber Person of the Year from each of the state and local associations that comprise the NRLA, during its Industry Recognition Dinner.
Ferris presented the New York and Suburban Retail Lumber Assn. Lifetime Achievement Award to Joseph Lauto of Great Jones Lumber.
“The ingenuity needed to run a profitable lumber business on three floors in New York City can only be learned over a lifetime,” Ferris said. “The ability to anticipate how new building materials will hold up under the fire code can only be learned over a lifetime; the impact that Joe has made to his community through his charitable works can only be achieved in a lifetime. And the long-term relationships Joe has cultivated can only be as deep as his are when cultivated over a lifetime.”
Other honorees included Tim Wiley of the Eastern New York group. “Tim is known for his passionate work on behalf of our industry, his dedication to completing every task perfectly — but most of all Tim is known for his modesty,” said Ferris, when inviting him to the stage.
Sheldon Kahan of Interstate + Lakeland Lumber was Lumber Person of the Year from the Connecticut association. “Whatever Shelly takes on, it must be done to the highest standard. For example, if he’s going to build a website or a showroom, it’s going to be the best website or showroom in the country,” Ferris said.
In the Mid-Hudson Lumber Dealers Association, Karen Page of H.G. Page & Sons was recognized. “Karen’s many years of dedication and leadership with the Mid-Hudson Association is as well known as her generosity, modesty and hard work. Karen has contributed countless hours of service, which has benefitted us all,” Ferris said.
ProBuild Alum: Where are they now?
Robert Marchbank, the newly appointed CEO of ProBuild, is a seasoned executive who spent 19 years moving up the ranks at Ferguson Enterprises, where he eventually became CEO for the entire European operation. He takes on the top job at the largest LBM chain during the LBM’s worst downturn — in many ways, not an enviable position.
And to top things off, ProBuild is owned by a privately held company, Fidelity Capital, that has grown impatient with the continued loss of profits at the Denver-based chain. ProBuild was formed by bringing together some of the most successful companies in the business — Lanoga, Strober, Hope Lumber, United Building Supply — and the men who helped build them.
But Marchbank presides over a different group of executives now. With the exception of Ed Waite, executive VP local operations (but for many years, the president of Spenard Builders Supply in Alaska), no one on the 10-person executive team worked for one of ProBuild’s legacy companies.
So where did they all go?
Home Channel News tracked down a number of ProBuild’s former executives, many of whom have either started new businesses, or retired, or are waiting for their non-compete agreements to expire so they can start or join other LBM companies. Some individuals left the company on their own terms; others were forced out. In the end, it doesn’t really matter. The important thing is that most stayed within the industry, because as the saying goes, once you get sawdust in your veins …
• Paul Hylbert, CEO, Kodiak Building Partners
Paul Hylbert left the chief executive’s job at ProBuild in April 2011. Three months later, he announced he was joining a partnership called Boreas Advisors (comprised of former finance guys from ProBuild) “to look for opportunities in the housing and building products industry.” Although they started in the steel fabrication business, Hylbert and his investment crew — now called Kodiak Building Partners — are searching out building products companies that serve new residential, repair and remodeling, and commercial construction markets.
• Bill Myrick
The July 2011 announcement that Bill Myrick was leaving ProBuild, after only 10 months as CEO, was the beginning of a three-month purge of high-level executives that included Jim Cavanaugh, executive VP operations, and Joe Todd, executive VP specialty distribution and pricing. Myrick, the former chief operating officer of 84 Lumber, has spent his entire career in the LBM business. He has no intention of leaving it, he said. “My non-compete expires in July, and I’ve been talking to some companies, as well as some private equity firms that are interested in getting into this space,” Myrick told Home Channel News. In the meantime, the 50-year-old has been traveling and visiting with his first two grandchildren, both born in the last year.
• Joe Todd, principal, Rosen Materials
Joe Todd had numerous titles at ProBuild — president of marketing development, head of national accounts, northeastern regional president — before he left in October 2011 as executive VP specialty distribution and pricing. That same month, he joined up with Drew Rosen of Rosen Materials, who had bought back some of his family’s drywall and steel framing yards from ProBuild and was expanding the chain. “We’ve done it mostly through greenfields and small acquisitions,” Todd told HCN, explaining the company’s 10 locations; Florida has eight outlets, and Chicago and Las Vegas each have one unit. Next on the horizon: “Colorado,” Todd said.
• Ben Phillips, president, Phillips Group
Phillips held several positions at ProBuild — executive VP as well as chairman — until Fidelity made him the chief operating officer of U.S. operations for its Devonshire Group, putting ProBuild under his domain. Phillips left Fidelity in May 2010. He now does operational and leadership management consulting under his own firm, the Phillips Group. “I also work for private equity groups that are doing acquisitions,” he told HCN.
• George Finkenstaedt, principal, M & A Advisors
Finkenstaedt was a senior VP corporate development when he left ProBuild in 2008. Like his business partner, former executive VP and acting ProBuild CFO Bill Brakken, Finkenstaedt didn’t want to make a permanent move to ProBuild headquarters in Denver. So the two men have been putting together M&A deals ever since. They worked on the Harbert Lumber acquisition, a four-unit chain in Denver purchased by ProBuild, and the Edward Hines Lumber Co. merger with US LBM Holdings and BlackEagle Partners. “We’ve got two deals [pending] right now,” Finkenstaedt told HCN. “There are a lot more [investors] interested in the LBM sector than last year.”