Florida: Has the tide turned in the Sunshine State?

BY Brae Canlen

Housing economists, reading the tea leaves of recent building permits and home sales, are not yet ready to say, “It’s over.” But certain states are definitely showing a pick-up in business at both the builder and LBM supplier level. They say one of these states, surprisingly, is Florida.

Florida paid dearly for the housing units it reaped during the boom years. Florida is one of the four sand states (along with Arizona, California and Nevada) that accounted for 19 of the top 20 metro foreclosure rates in fiscal 2010, according to RealtyTrac, an online marketplace of foreclosed properties. Many of these are tied up in litigation in a case currently before the Florida Supreme Court, and banks are more reluctant now to initiate foreclosures.

“The numbers are declining significantly,” said Lesley Deutch, a VP at John Burns Real Estate Consulting. Her firm surveys builders around the country on a monthly basis about their unsold finished homes. “In the better markets, they’ve gone through the [backlog] and they’re building new homes.”

Builders are buying lots and land in order to position themselves for future growth, Deutch said. And the price of finished lots in Florida is rising. Demand from homeowners is also picking up, and not just for moderately priced homes. The Naples market had a “fantastic spring selling season” that also included active adult communities and luxury golf course projects, according to Deutch.

And if you find it hard to believe that prospective home buyers were camping out the night before a community’s grand opening, Deutch saw it with her own eyes in Naples, Fla. “They wanted to secure the best lot locations,” she explained. Also, the regional builder, GL Homes, has a good reputation in south Florida. Lastly, “[Buyers] realize that prices aren’t declining anymore, so it’s time to jump off the fence,” Deutch added.

Statistics from the Florida Realtors Association tell the same story. Pending sales increased 31% for single-family homes and 22.5% for townhouse-condo properties in June 2012 compared with June 2011, according to the trade group. Sales that closed on single-family homes rose 5.3% in the same time period.

The previous month was better. Pending sales in May increased 43.1% for single-family homes and 33.4 % for townhouse-condo properties. More importantly, the year-to-date figures showed a 19.3% rise in pending sales of single-family houses for 2012 and a 2.3% rise in closed sales.

To a realtor, there’s a big difference between the words “pending” and “closed.” But to a building materials seller, the most important thing is that houses are being framed in new developments and doors and windows, and cabinets are being purchased. Most Florida pro dealers interviewed — although not all — felt optimistic about the future, given their recent sales volumes.

Al Bavry, owner of Kimal Lumber in Nokomis, Fla., told Home Channel News his three-unit LBM chain is running 34% ahead of last year’s sales and 17% ahead of budget. His customers, a mix of high-end remodelers and custom builders on Florida’s West Coast, have become busy this year.

“In Sarasota, [buyers are] gobbling up these 40-, 50- and 60-year-old homes and putting a lot of money into them,” Bavry said. North of Sarasota, a 2,000-acre development, called Lakewood Ranch, is under construction, with a commercial mall and homes in the $600,000 to $700,000 price range.

“A high percentage of these [mortgages] are cash deals,” Bavry observed. “Very little banks are involved.”

Some of these deals are offshore investors or wealthy foreigners who would like a Florida getaway in Orlando or Miami. Others are retirees who cashed out their previous homes. Whoever they are, when they move into existing homes, they like to remodel. These are the customers Bavry targeted three years ago when the new-homes market went cold.

“I decided not to reduce my sales staff. Instead we developed new accounts and targeted the niche (custom builder) and high-end remodeler,” he said.

Kimal doesn’t serve many production builders, but there’s plenty of national chains in Florida — ProBuild, 84 Lumber and Builders FirstSource, to name a few — in position to partner with the big boys.

“D.R. Horton will go into an [unfinished] subdivision that stopped cold and buy 10 or 15 lots,” observed one pro dealer. “The next thing you now, they have roofs going up.”

Statistics from the U.S. Commerce Department show a definite uptick. In May 2012, single-unit housing permits in Florida were up 27.3%. Year-to-date, the number is 28.4%.

But as everyone knows, this recovery is a bumpy ride, and the train could derail for any number of reasons. Deutch, the John Burns analyst, worries about a prolonged period of high unemployment rates or job losses in Florida. “Monitor the Florida economy carefully,” she warned investors.

Don Magruder, CEO of Ro-Mac Lumber & Supply in Leesburg, Fla., is closely watching the outcome of the November elections. “People are still spooked” about the economy, Magruder said. Although he also deals with all-cash customers, bad appraisals are still a problem. “Only the stripped-down homes get appraised properly,” he said. Upgrades such as granite countertops or oak flooring don’t seem to add much value.

But Ro-Mac Lumber, which operates four locations in central Florida, has seen some improvements this spring. The foreclosed homes remaining on the market are a “disaster,” Magruder said, and overall, housing inventory is low. Residential building has picked up, but this pro dealer is more cautious than optimistic.

“We’ve been through two or three springs where it looked like things were going to improve and then there was a pull-back,” Magruder recalled. In fact, he observed, “In the last four weeks, it’s cooled off for us.”


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Critics of LEED rules gain new allies

BY Brae Canlen

LEED v4, the proposed update to the nation’s most prevalent green building program, has been under intense pressure to change its current wood certification rating system, which only recognizes one set of standards, those of the Forest Stewardship Council. But the U.S. Green Building Council (USGBC), which oversees the LEED program and its current revision process, is now under fire for another part of the LEED update that has nothing to do with wood. This time it’s chemicals, and the USGBC has stirred up another hornet’s nest of manufacturers, lobbyists and federal legislators who are determined to defend their industry against what they consider an unfair and baseless exclusion of their products.

The 100-point system of LEED v4 (formerly known as LEED 2012) includes two credits for “materials and resources” in its draft version: One would award a point for “material ingredient reporting” and the other for “avoidance of chemicals of concern.” The two credits are intertwined, because few LEED projects would want to publish a list that contains “chemicals to avoid.” Exactly what is on this list is subject to interpretation, but its very existence has touched off a lobbying campaign by the American Chemistry Council (ACC), a trade group whose members include 3M; Dow; DuPont; AzkoNobel (parent company of Glidden Paints); and BASF Corp., maker of insulation, roofing and exterior cladding.

Keith Christman, managing director of plastic markets for the Washington D.C.-based group, said there are approximately 1,600 building materials that would not pass through what he calls “the green screen.” They include spray foam insulation; many types of caulking; products containing crystalline silica (an ingredient in cement) or sand; wood dust; PVC and vinyl, which eliminates vinyl siding and windows, including the Energy Star versions.

“[The chemicals] seem entirely arbitrary to us,” Christman said. “It’s not based on any scientific research.”

The lack of testing of the “chemicals to avoid,” or an analysis of alternative building materials, their energy efficiency and their cost seemed a particular irritant to the 18 U.S. senators who signed a letter to the General Services Administration (GSA). If the chemical provisions pass in LEED v4, the senators want the GSA to stop requiring LEED certification for newly built or renovated federal buildings.

“These proposed chemical restrictions could arbitrarily affect many energy-efficient construction products, such as insulation, roofing, wiring and energy-efficient windows, putting a further strain on already tight federal budgets,” the senators wrote.

In response to the letter, the USGBC’s senior VP global policy and law, Roger Platt, reversed the equation. He pointed out that all LEED credits are optional and voluntary. A project can attain the magic LEED number — 100 points — any way it chooses. “There is not a ‘red list’ of banned chemicals,” Platt wrote.

In an interview with Home Channel News, USGBC policy director Lane Burt disputed the idea that energy-efficient building materials are being banned in the latest draft of LEED. He stressed that the requirements of the two chemical-related points have already gone through a number of changes as the LEED revision has unfolded. LEED v4 will enter its fifth public comment period on Oct. 2, 2012. It ends Dec. 10, 2012.

“LEED will continue to pursue the sweet spot of industry and human health advocate concerns in every version of the LEED rating system,” Burt said.

The USGBC also has its supporters, such as the American Sustainable Business Council. “The ACC’s attack on the LEED program is a disservice to those chemical companies that recognize the growth and profit potential of developing innovative materials to satisfy the steadily increasing market demand for energy-efficient buildings employing less hazardous chemicals,” said Richard Liroff, Investor Environmental Health Network.

Meanwhile, a new group that calls itself the American High-Performance Buildings Coalition announced its formation on July 17; its mission sounds very similar to LEED’s: “We support the development of green building standards through consensus-based processes.” But there was one phrase tacked on the end. These standards will be “derived from data and performance-driven criteria.”

“We realized there were concerns in other parts of the building construction community,” said Marie Francis, spokeswoman for the ACC, who helped organize the group. “We want there to be ample opportunity for shareholders to comment and contribute to the [proposed LEED] design.”

Besides the ACC, members of the coalition include the National Lumber and Building Material Dealers Association, the Southern Forest Products Association, the Treated Wood Council, the Adhesive and Sealant Council, the American Coatings Association, American Fuel & Petrochemical Manufacturers, the American Supply Association, the Center for Environmental Innovation in Roofing, the Chemical Fabrics and Film Association, the EPDM Roofing Association, the Expanded Polystyrene Industry Alliance, the Extruded Polystyrene Foam Association, the Flexible Vinyl Alliance, the Industrial Minerals Association, the National Association of Manufacturers, the National Hispanic Landscape Alliance, the Plastic Pipe & Fittings Association, the Polyisocyanurate Manufacturers Association, the Resilient Floor Covering Institute, the Society of Plastic Industry, the Society of Chemical Manufacturers & Affiliates, the U.S. Chamber of Commerce, the Vinyl Institute, the Vinyl Siding Institute, and the Windows & Door Manufacturers Association.



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Distribution Nation

BY Ken Clark

The nation’s leading wholesale distributors of home improvement products and building materials saw an increase of 2.23% in 2011 sales, according to the research that produced the 2012 Home Channel News Top 100 Distributor Scoreboard.

It wasn’t easy.

According to the data culled from surveys, financial reports and estimates, the nation’s top 100 distributors produced a total of $40.263 billion in sales, compared with $39.385 billion in 2010.

In a year when an anticipated building boom never materialized and economic recovery seemed agonizingly slow, several companies showed high performance. How? It wasn’t easy.

“We knew going into 2011 that the industry was still effectively in a zero-sum environment, and that if we and our customers were to grow, it would be due to increased market share more than from an improving economy,” said Ron Beal, CEO of Memphis, Tenn.-based Orgill.

Orgill is one of a short list of home channel distributors to achieve sales growth in the double digits. Others include Amerhart, Blish-Mize, Cedar Creek, ENAP, PACOA, Progressive Affiliated Lumbermen Cooperative and Weyerhaeuser. If there was any common thread from the 2011 success earned by these distributors, it would be a combination of staying aggressive in both customer acquisition and expansion opportunities, and honing efficiencies wherever possible.

“Some of the changes have been small,” said Nate Jorgensen, VP, Weyerhaeuser Distribution. “We saved significant dollars through more efficient truck routing, for example. Other changes have been larger, such as adding entire product lines or bringing rebar cutting in-house.”

Amerhart’s Mark Kaspar had a simple answer to how his company scored a 10% increase. He said the company added a major product line — functional cabinet hardware — and expanded its footprint. Of course, it only sounds simple.

Here, in the words of the executives who pulled it off, are some of the high-growth stories on the Top 100 Scoreboard:

Orgill, up 11.7%
“We focused on retaining every customer, and doing everything we could to help them grow their sales at retail. Continued operational improvements helped us maintain fill rates at consistently high levels, tighten the delivery windows for our truck fleet and improve the overall quality of our services in practically all areas,” Beal said. “The cumulative impact of these efficiencies enabled us to profitably operate with lower margins, thus allowing reduced prices to our customers. Expanded assortments in almost every product category and aggressive new promotions helped our retailers seek out new avenues for growth in their local markets. Not surprisingly, the things that worked for our existing dealers also proved to be attractive to the several hundred new customers who came on board with us during the year. Everything combined to make 2011 a very good year for Orgill.”

PACOA, up 27%
“Investments were made in three key areas: technology, people and infrastructure,” said Steven Geismar, president of the Port Washington, N.Y.-based paint and hardware distributor, formerly known as the Paint Applicator Corporation of America. “We launched a scanner initiative that gave our sales force the ability to more efficiently scan orders and service customers. We upgraded our website, as it became more user-friendly and is the preferred website with several of our customers where we share the business with our competition. We invested in new trucks and material-handling equipment to handle our increased business and improved our service levels by offering next-day service on our trucks as we grew into new markets. We added more than 4,000 new stocking SKUs to support the new business that we are now servicing, as well as used the new products to grow share in our existing customer base.

“We strategically added new salesmen to our sales force where we felt they would best complement our existing sales force, and kept to our core business and territory of strength to ensure that we could sustain the investment.”

Cedar Creek, up 19%
“First of all, we have a number of branches operating in one of the better recovering housing regions (Texas and Oklahoma) and so have benefited from that, as well as from the overall increase in housing starts across our entire operating area this year,” said a company spokesman for the Oklahoma City-based LBM distributor. “We service several building market segments, including new construction, R & R, home centers and industrial customers (cabinet shops, furniture, outdoor play sets, etc.) We created separate growth initiatives this year for each segment and were successful in the first half in reaching many of our objectives.

“Finally, some of our revenue increase has come from our geographic expansion, although most are startups that will take time to reach the revenue level of our established locations.”

Weyerhaeuser Distribution, up 14%
“In 2011, we re-focused the business on market and customer needs,” said Jorgensen, VP, Weyerhaeuser Distribution, based in Federal Way, Wash. “After years of fine-tuning our supply-chain skills, we leveraged our relationships and our reputation in the marketplace as a strong and reliable company to fuel our growth. We’ve continued to build momentum in 2012 with a growth pace that is far greater than what we achieved in 2011.

“A few key areas for us in 2011 were expanding our market-tailored product offerings, growing our already-expert sales and service team and continuing to keep costs in check.”


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To what extent will your office be impacted by March Madness, which tips off this week?