Dealers keep on truckin
LBM dealers trying to deliver building materials into New York are wondering if they haven’t become a new source of state revenue, given the stepped-up enforcement of linkage laws by the Department of Transportation (DOT). Although the issue is being addressed in the New York State legislature by a bill brought forth by the Northeastern Retail Lumber Association (NRLA), lumberyard delivery drivers are playing cat and mouse with state troopers while their bosses are fighting $1,000 citations in court.
Each state has its own limits on weight and length for commercial trucks. Most fall between 40 ft. and 60 ft. New York is at the low end — 40 ft. — the typical length of a lumberyard delivery truck. The problem comes when you mount a forklift or an articulated crane or another piece of equipment on the back to unload inventory. That adds a few feet to the trucks length or “linkage.” Which is OK in Connecticut and Vermont, where the limit is 46 ft. But once these drivers cross into New York, they’re often likely to meet up with a state trooper and maybe a portable scale in order to undergo an inspection and receive a citation. LBM dealers have told Jeff Keller, manager of legislative and regulatory affairs for the NRLA, that a certain highway patrolman waits at the border between New York and Connecticut waiting for violators.
“They know the guy,” Keller said.
The NRLA is trying to address the matter with a bill in the New York State legislature, but these legislative fixes take time. (More on that later.) Meanwhile, pro dealers are coping in a variety of ways: fighting the citations in court, modifying their equipment or finding “alternative” routes to avoid being pulled over.
Jay Balkan, one of the owners of U.S. Lumber in Lynbrook, N.Y., is fighting a $1,000 “overlinkage” citation right now, with the help of a lawyer. His drivers have been cited “three or four times,” he said, and each time the fine goes up. Balkan’s trucks are hitting against an even more restrictive regulation enacted in New York City: Commercial trucks, including any piggybacked equipment, cannot exceed 35 ft. in length.
“As soon as you cross the border from Long Island to Queens, the DOT stops you and inspects your truck,” Balkan said. Measuring the length is only the beginning, he said. “They go through everything. I keep my trucks [well maintained], but no matter what, I come back with 10 or 15 tickets.”
Has Balkan thought about cutting back his deliveries to New York City? He laughs at the very idea.
“We’re finding new routes,” he said.
On the state level, LBM dealers find it particularly irksome that a law passed in 2003 to aid tourism allows recreational vehicles (RVs) up to 45 ft. to travel the highways of New York. They point out that their drivers are trained, licensed and drug tested — yet they are restricted to 40-ft. vehicles.
Legislative bill 4505, which would amend the vehicle and traffic law in New York to allow 45-ft. commercial vehicles, passed the state senate on Jan. 23, 2012, after failing to muster enough support last year. It has been introduced into the state assembly, where members of the transportation committee are working on its final version. The N.Y. Department of Transportation, which did not respond to a request for comment from Home Channel News, is working with the NRLA and members of the legislature to hammer out acceptable wording, according to the NRLA’s Keller.
“We’re open to any suggestions or solution that other states are using,” Keller said. “These trucks are vital to our members.”
Even if bill 4505 does pass, it won’t help dealers driving into New York City, which can set its own commercial vehicle lengths. Many lumberyard owners have just thrown in the towel and ordered special equipment to satisfy local or state regulations. Dana Schnipper, owner of JC Ryan EBCO/H&G, a distributor of doors and windows in Farmingdale, N.Y., has a made-to-order boom truck that can carry equipment and still fit within New York State’s 40-ft. limit.
Schnipper, who chairs the NRLA’s New York legislative committee, can’t explain the uptick in citations. But he’s been hearing a lot of complaints lately from dealers in Connecticut and Massachusetts who get cited when they cross the New York line.
“I think the law has been randomly applied over the last 15 years,” Schnipper said.
Reporter’s Notebook: IBS
Orlando, Fla. — Most attendees just made passing mention to the thinner crowds and smaller booths this year at the International Builders’ Show. It’s like commenting on how cold it is when there’s snow falling from the sky. Regular exhibitors that opted out from the show were Home Depot, Masco, Andersen Windows, Atrium and Weather Shield.
Also missing in action were the girls in orange hot pants and white T-shirts giving out trinkets. Fewer carnival barkers were running games. It made for a more tranquil environment, with even the power tool demos a little quieter this year. Trying to network over that din is difficult and risky, because you never know at what part of your conversation the circular saw will cut off.
Another noticeable difference between 2011 and 2012: The liquor started sooner and in more places than ever before. I didn’t see a single espresso bar, but by 2 p.m., I saw my first open bar on the show floor and by 4 p.m., every other aisle had at least one.
Foot traffic was neither heavy nor light. You could move about the aisles fairly well, but the hall never seemed like a ghost town. I’ve been to trade shows last year that were small enough to do in one day. This was not one of them.
Insulation in its various manifestations was everywhere in 2011, but solar made a big splash in 2012. Larger manufacturers like CertainTeed and Dow that have been showing prototypes of solar roofing panels are clearly ready to go to market; now the smaller, innovative vendors are bringing on products that can also generate electricity through the sun’s rays. Anywhere Solar, a San Diego-based firm, displayed strips of solar lights that can be screwed in (and clipped together) on shutters, railings, fascia boards, RVs — you name it. “Solar wherever you think of it,” said company director Bennet Newman.
Over at the Lumber Liquidators booth, an aging white rapper divided the generations into two camps as Vanilla Ice made a scheduled appearance to sign autographs and pose for pictures. Not everyone knew who he was, and more than one person referred to him as “Ice T,” but the television host of “The Vanilla Ice Project,” where he renovates a house in Palm Beach on the DIY Network, clearly still has a following.
On a more sober note, the usual lineup of housing forecasters was not completely glum this year. Ed Sullivan, chief economist of the Portland Cement Association, was (as expected) the most cautious of the lot, predicting 443,000 new single-family housing starts in 2012. That’s a 3% increase from 2011.
“Banking processing delays that are pushing foreclosures into 2012 and maybe into 2013” are dragging down the housing recovery, Sullivan said. Multi-family construction is on a roll however; a 55% increase in 2011, Sullivan estimated, and double-digit increases over the next two years.
David Crowe, chief economist for the National Association of Home Builders (NAHB), which sponsors the IBS event, predicted a possible 16% increase in single-family housing starts.
“I’m not saying we’re going to have a banner year; I’m saying we’re going to have a better year,” Crowe told a crowded conference room of builders and vendors. Single-family starts are forecast to reach 499,000 in 2012, compared with the record low of 429,000 in 2011. One year later, the NAHB forecasts 660,000 single-family starts.
When it came to multi-family, Crowe subtitled his press conference, “How long can the good times last?” An estimated 208,000 multi-famiy units will be constructed in 2012, according to NAHB estimates. Even the condo has shown some promise in terms of expectations for the future, Crowe said.
Joining Crowe was Ron Witten of Witten Advisors, who provides market advisory services to major apartment developers. He debunked the theory that foreclosures have forced people into apartment units, thus boosting demand.
“The growth [in occupancy rates] has not come from a flight from foreclosed homes but the arrival of this echo boom generation and their ability to get jobs. Most of the growth we’ve [already] seen went to single-family rental homes,” Witten said.
Witten later appeared on a multi-family housing panel that discussed the shortfall seen in supply meeting demand over the next few years.
“Capital is limited in this current market, and developers are having a difficult time obtaining the credit needed to finance the development of new apartments,” said developer W. Dean Henry, president of Legacy Partners Residential in Foster City, Calif.
A panel of remodelers pointed to three trends to watch in 2012: aging in place, energy retrofits and reinvesting in distressed properties. Spending on improvements to owner-occupied housing is nearly equal to that of new residential construction, said Paul Emrath, NAHB’s VP survey and housing policy research. The official prediction: Residential remodeling will rise 8.9% in 2012. Look for stronger growth in the second half of the year.
Casting farther into the future, a panel of green building experts talked about 2015 and beyond. Green “appraisals” may become the norm, they said, and it won’t be long before homes start to get appraisal credits for green features. Building products are already appearing with Environmental Product Declaration or Environmental Facts boxes. (Picture those nutritional content boxes on food, but replace protein, fat and fiber with recycled content, energy consumed during production and so on.)
Jennifer Languell, president of Trifecta Construction Solutions, noted that large corporations — IBM, Best Buy and Johnson & Johnson, for example — are looking for ways “to get into the green space.” But it would be a mistake to only chase the high-end, green-building dollars. Her firm has recently done two affordable housing projects that were LEED-certified, she said, and the U.S. Green Building Council does a high percentage of LEED projects with the federal government.
The Fed, as the Federal Reserve System likes to call itself, signaled its concern over the housing market by sending none other than chairman Ben Bernanke to address attendees on the last day. The line to get into Bernanke’s speech started 90 minutes ahead of his address, which drew heavily on a white paper on the U.S. housing market submitted to Congress in January.
Bernanke made it clear that he doesn’t think that historically low interest rates are going to fix the problem. In fact, he was obviously worried about the overall effect of the housing crisis on the recovery of the overall U.S. 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, he pointed out.
Although Bernanke 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, he said.
Vacant and foreclosed homes continue to exert downward pressure on the market, according to Bernanke, who outlined several proposals to get these homes off the market, such as converting them into rentals or turning them over to non-profit “land banks.”
Bernanke’s staff is also communicating to the banks that now is a bad time to act miserly, he said.
“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.
In a question-and-answer session with the audience, Bernanke was asked what he, as Federal Chairman, could do to move forward on his ideas to fix the housing market. The answer: Congress, the FHA and other government agencies will have to implement (or not) the proposals he has put forth.
“Our goal was to put out there some main issues for people who have to make these decisions, and to make people realize how central to the economy housing is,” Bernanke said.
Defining opportunity at Builders FirstSource
Builders FirstSource turned in positive fourth-quarter results, including a 31% jump in revenues to $192.7 million. But it was CEO Floyd Sherman’s statement about “[taking] advantage of opportunistic inventory buys” toward the end of the year that caught the attention of many people in the LBM industry. Even the analysts on the Dallas-based company’s Feb. 17 conference call wanted to know more. Was it a temporary thing or a new strategy, one asked?
Praising the acumen of his merchants to make timely buys, Sherman said: “There are times that we can just ride the inventories on a normal replenishment basis, and there are going to be times that we will step in and ensure that we have the complete quarter coverages. So I really can’t say going forward. It is just going to continue to be a mixed bag.”
Another analyst wanted to know if the four-point rise in gross margin points (year-over-year) in commodities was due to the aforementioned “opportunistic inventory buys.”
“That is a combination of good inventory buys [and] fixed-cost absorption,” Sherman said. “It is a combination of improved labor efficiencies in the COG side, the manufacturing side of the business. And also a reflex of slightly improved pricing.”
But how often do these opportunities come along, the analyst wondered? And do you have the money to take advantage of them?
“It is only going to occur a limited number of times during the year,” Sherman said. “Probably 60% of our business is either 60- or 90-day forward pricing. And if we feel that the market conditions for that coverage period is going to be real volatile, then we are going to [protect] the pricing we have in place. We will always look for those small incremental buys that we can do at a real discount to market, just to get the slight improvement in our average costs that we have on materials and inventory. But that is a relatively small piece of the replenishment.”