Mixed messages in home metrics
While housing starts and building permits continue to trend higher, builder confidence, which often dovetails nicely with housing construction figures, has dipped over the last few months.
So what gives?
According to the National Association of Home Builders (NAHB), which, in conjunction with Wells Fargo, publishes the builder confidence index, waning confidence is not necessarily due to diminishing demand for new homes.
NAHB economist David Crowe said: “In addition to tight credit and below-price appraisals, home building is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself.” In other words, the downsizing that took place during the recession and the economic flat line that followed dramatically diminished those industries that builders rely on to support them.
One of those industries suffering “growth pains” is the wood products industry. As a result, there are certain instances where builders are not receiving their deliveries on time. However, rising demand and a cautious reaction on the part of producers to increase production creates the scenario builders and their representatives dislike even more than tardy shipments — high lumber and panel prices.
Another issue apparently lowering builders’ confidence is the draining of the skilled labor pool. The housing downturn sent framers, roofers and sheetrockers looking for other forms of work. In order to coax them back, builders sometimes now must pay higher wages, adding to their costs.
Other concerns among builders include a lack of developed lots to build upon and credit availability.
All these difficulties and roadblocks apparently slowing home production would lead one to conclude that demand for new homes is likely outpacing the number of new homes under construction. One thing learned when the housing bubble burst is that builders have a propensity to overbuild. Perhaps a slow, steady period of recuperation is best for the economy, one that keeps home building in check and lets homeowners continue to recoup some equity.
This article was provided by Crow’s Market and Price Service/RISI. For a free trial of this service, visit RISI.com/crowsfree.
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.
Lumber: Trading in the SPF market slowed, but prices remained strong, even rising a few dollars in some instances. Weather again hampered sales. A sharp decline in futures early also took steam out of the market.
Buyers continued to order Southern Pine lumber volumes at a decent rate, but not as eagerly as the week prior. Mill order files and moderate demand kept upward pressure on most #2 dimension prices. Increases of $5 to $10 were typical. Coastal species lumber trading was strong and steady.
Good consumption rates brought buyers back into the market to replenish. Traders often noted the significant amount of jobs taking delivery, waiting on shipments or quoted. The market for Inland species lumber started on a quieter note than in previous weeks. Extended mill order files and limited mill offerings kept buyers on the sidelines.
Wholesalers reported steady sales of both truckload and LTL volumes out of reloads. Radiata Pine remained in short supply for Mldg&Btr, and Shop was unavailable. Limited offerings of Mldg&Btr were quickly snapped up, often at a premium.
The markets for Moulding and Shop remained a struggle for Ponderosa Pine producers. Control of the Ponderosa Pine board market remained in the hands of producers, although sales levels quieted. The slower pace was attributed to lengthy order files, as well as strong pricing.
Panels: OSB producers remained on the sidelines, relying on their order files to help them get through the slow period that has persisted. Most mill offerings were light in volume and firm or higher priced.
Southern Pine plywood mills reported a quieter tone to the market but still kept lead times of two to three weeks. Prices for thick-rated sheathing items were the most likely to rise across all three zones. While other markets enjoyed steady demand, Western Fir plywood sales remained skimpy in comparison.
Producers bemoaned the wintry weather in the northern reaches of the United States. Canadian plywood continued to struggle a bit. Producers, anticipating better demand to come in the near future, tried to hold prices, even though many of them had light order files. Both western producers and buyers of particleboard noted modest but noteworthy improvements in that market. The market for MDF remained strong. The frenzy earlier this year among buyers to secure supplies has subsided, and the market appears more orderly.
Adventures in human resources
“Why can’t I find qualified help?”
“With all of the unemployed people out there, why can’t I find the skills I’m looking for?”
These are questions we hear every day from industry employers. And with unemployment rates ranging upward from 7.5% since early 2009, they’re not illogical. So what’s the reality?
Simply stated, there have been a number of changes in the employment market since we entered the Great Recession, and hiring managers today need to be aware of them in order to compete.
As our industry entered the downturn, we began to see a “talent gap” emerge as the skill sets of those seeking employment often fell short of employers’ requirements. This was not totally unexpected, as the first baby boomers moved into early retirement as we entered the recession.
And since our industry was more negatively impacted by the economy than most, this problem was exacerbated by another reality. With layoffs and downsizing, many of our younger, upwardly mobile employees left for opportunities in more secure, growth-oriented industries.
But with the unemployment rate being so high, shouldn’t there be others just waiting to be hired? Unfortunately no, as there is yet another issue compounding the problem. Although difficult to believe, adult men have been dropping out of the workforce at an alarming rate. While more than 95% of men between the ages of 25 and 54 were active in the labor force 50 years ago, according to the BLS, less than 65% are active now.
So where have they gone? Many are on extended unemployment, many on long-term disability (more than 3 million men, according to one source), and many have just given up and become dependent on their wives’ income or content with part-time positions. In the accompanying graphs, one can see how labor force participation has remained somewhat constant for all adults over the past 20 years, but note what has happened to adult male participation.
The reality? The “labor pool” in 2013 isn’t as deep as one might think. So, as we begin to rebuild our employment base, we need to be creative and look beyond traditional recruiting scenarios, considering other options: part-time executives, contract and project employment, shared employees, virtual management, etc. And we need to consider the entire employment market, not just the “typical” candidates we considered exclusively in the past. Remember, with this smaller “labor pool,” recruiting has become a competitive process. We need to make sure we’re prepared for it.
In rain or snow, customers are buying at ‘need’
Late winter snowstorms in the Midwest and Northeast and the prolonged coolness that is forecast to stretch into April will impact several home improvement product categories this spring — some favorably, some not so — according to Planalytics, which provides “business weather intelligence” to companies worldwide.
“Weather conditions are a primary driver of consumer buying decisions as people focus on products or services related to products like lawn and garden, or other ‘maintenance needs,'” said Scott Bernhardt, president of Planalytics, during the company’s Business Weather Intelligence Outlook webinar in late March. “Weather can drive purchasing decisions by creating a basic need, an elevated want or an immediate problem.”
Bernhardt said today’s consumer is more “cautious, planned and price-sensitive” in their spending. “Prudence is trumped by what a consumer needs or wants now,” he said. “They are shopping closer to ‘now’ and buying at ‘need.’ The weather window of opportunity closes quickly.”
The winter and early spring of 2013 have trended several degrees colder than the comparable 2012 period; for example, last year’s spring temperatures began in February. By contrast, this year’s normal readings are not supposed to occur until late April. “The extended cold and wet weather has put yard work on ice,” Bernhardt said. “It’s a difficult time for spring products.”
The 2012-2013 winter/early spring has been characterized by more precipitation than the year-ago period. For the lawn and garden category, Planalytics predicts a 1% drop in sales for the month of April compared with a year ago.
While there are numerous positive indicators — stock market and housing recovery stats among them — spring demand is slow to start in most of North America because of the harsh weather that has postponed purchasing decisions.
The good news, according to Bernhardt and Maria Maldonado, a manager of client services, is that once the spring weather breaks, it will lead to a flurry of business activity. “In the Northeast especially, but other parts too, consistently colder temperatures will keep spring demand depressed, but a warmer late April will unleash pent-up demand for spring categories,” Bernhardt said. “There is a lot of pent-up demand in many of the large population centers.”
Weather: It’s all regional
Jeff Doran, a manager of client services, said retailers should never plan their spring inventory based on the previous year’s weather. “Last February felt like spring in many markets, and March-April was the hottest in 118 years,” he said. “March 2012 is very unlikely to happen again; therefore, if you based your planning for 2013 on 2012 numbers, you’d be in trouble.”
Due to the colder and wetter 2013 spring, the firm is predicting that lawn mower sales will be up 1%; however, lawn irrigation products will be down 4% and air conditioners down 2%.