NAHB chief plays the Trump card
Orlando, Fla. — Back in October at the ProDealer Industry Summit, National Association of Home Builders CEO Jerry Howard described the national political landscape under the impression of a looming Clinton administration.
That was then.
Now, as the keynote speaker for the LBM Advantage convention here in Orlando, Howard had kind words for the current president, his vice president and the speaker of the house. He also railed against what he sees as the bitter, partisan atmosphere in Washington that extends even to restaurants and bars.
His presentation here to members of LBM Advantage — a buying group energized by the recent merger and integration of ENAP and PAL — also revealed the difficulties of predicting matters of state.
"I did in the fall, like most in official Washington media and Americans, believe we were about to have our first female president," he said. "The whole world was shocked."
From a business sense, it's still too early to judge the actions or results of a Trump presidency, but Howard stood strong on the side of at least one of the ideas that are generally associated with Trump — the elimination of unfriendly business regulations. In the construction of a typical house, regulations account for 25% of the costs, he said. And that's one reason the recovery has limped, rather than galloped.
Housing starts hit 1.17 million units in 2016, and are expected to grow to 1.24 million in 2017. That's significant, but not enough to keep businesses "running on full cylinders," he said.
Other thoughts on the state of the nation of homebuilding from the NAHB chief:
- "The biggest consistent problem that I'm told about as I travel around the country is the labor shortage," he said. And as the role of education and training has been pushed down to the states, the effort to bolster the trades falls on governors and state-by-state efforts. In some cases they are making strides with veterans programs, technical schools and even prison programs, he said.
- Don't believe the idea that young people prefer apartments to houses. "The spirit of Americans to own their own homes is as strong as it ever was," he said. "That's good for you , and it's good for us."
- The CEO shared thoughts on the commander in chief. "We've been fortunate in that we met with candidate Trump twice during the campaign — meeting in Trump Tower in New York City. Despite his persona as a gruff, 30,000 foot thinker, he knew building, he knew finance issues, housing. He understands the issues. My impression of him grew, he spoke off the cuff without being acerbic."
- The wild days of lending to anyone "who could fog a mirror," have been reformed, he said, and rightfully so. But Congress has overreacted, as usual. "We gotta get it back to the middle somehow, with prudent underwriting for mortgages."
- You can expect a protracted trade skirmish over Candian lumber, which makes up about 28% of the average, newly built U.S. house. The difficulty in acquiring lumber from Canada has led, in the NAHB's estimation, to cost increases of about 17%, with builders reporting spikes that rise even higher.
- "The lumber issue is one that is extremely relevant and one that will slow down the recovery," Howard said. "Unfortunately I don't see a near term solution to it." It could take years.
- So what to do? One option pursued "aggressively" by the NAHB: Encourage American producers to export less, and make up for domestic shortfalls.
- Ask anybody, he said, and they'll tell you that tax laws are too cumbersome and unwieldy. And the mortgage interest deduction has been cited as a prime target for many who advocate simpler codes.
That's why Howard said tax reform "can be extremely hazardous" to the housing industry. But he also believes that lawmakers will find a way to use the tax codes to benefit the public, and they'll also realize that some form of incentivizing home ownership is in the best interest of the country.
I find it interesting that
I find it interesting that the second headline for the article "politics mix with the sanctity of the mortgage interest tax deduction", yet only one line at the end of the article is given to the Mortgage Interest Deduction, and even that line doesn't say how high/low the MID is on Trump's chopping block, or even specifically state that MID is on the chopping block. I expected to read more about the MID, since it was prominently featured in the byline (?).
BMC by the numbers
BMC-Stock CEO Peter Alexander described “significant progress” for his company in 2016, partly thanks to the synergies achieved through the acquisition of Stock Building Supply, a little more than a year ago.
“Our merger, which we completed a little more than a year ago, unlocked numerous opportunities to expand the business and improve profitability," Alexander said. "During 2016, we achieved strong operational and financial results including significant gains in operating margins and cash generation."
During the company’s fourth quarter earnings call, BMC pointed to numbers that backed up the story of growth. Here are some statistical highlights:
- Total company net sales for 2016: $3.1 billion
- Total net sales growth: 10.5%
Amount of sales growth attributed to 2015 acquisitions of Robert Bowden and VNS: 4.2%
- Total number of BMC-Stock locations: 91
- Number of states in which BMC-Stock operates: 17
Share of total 2016 building permits generated in those 17 states: 63%
- Ratio of locations operating on one single Enterprise Resource Planning system: 2/3
- Amount of cost savings from synergies within the 2016 results: $31 million
Minimum expectations for additional cost savings by the end of 2017: $15 million
- Sales of BMC’s proprietary ReadyFrame job-site framing solution: $103 million
- Percent growth of ReadyFrame sales compared to 2015: 46%
Expectations for ReadyFrame sales by 2020: $300 million
- Percentage of customers who are single-family homebuilders: 75%
- Percentage of customers who are multi-family and commercial contractors: 13%
- Number of individual customers that account for more than 5% of total BMC sales: 0
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84 Lumber expands its c-suite
From the lumber yard to the c-suite, 84 Lumber is adding new talent to help usher in a new era of expansion, the company says.
The pro dealer promoted Mike McCrobie to chief procurement officer. The company is also conducting a search for a chief information officer.
McCrobie, a 20-year company veteran who started as a manager trainee in Star City, W.Va., previously served as the VP of the national and installed sales divisions.
In his new role as CPO, McCrobie will be in charge of purchasing, inventory management, pricing, cost forecasting and delivery. McCrobie will be based at 84 Lumber’s headquarters in Eighty Four, Pa., where he will be responsible for purchasing more than $2.5 billion of goods and services and managing $300 million of inventory.
“Mike’s exceptional knowledge of the business makes him the ideal candidate for this role,” said Maggie Hardy Magerko, president and owner of 84 Lumber. “He understands every detail of how the flow of products and services either help or hinder our customers and associates. Whether it’s a store selling materials to a custom builder, a door shop selling to a regional builder or a component planet selling directly to a national builder, Mike knows that process better than anybody.”
As CPO, McCrobie will be focused on streamlining procurement systems and making it easier for stores to focus on selling. McCrobie will also be collaborating with the new CIO to optimize all of 84 Lumber’s business tools and processes so that the company can continue to evolve and expand across the country, the company said.
The company says it is planning to open at least 15 new stores and hire more talent to staff those locations in 2017.
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