Shoreline Lumber adds showroom
The new showroom, located in Cape Coral, will carry a full line of dock pilings, heavy timbers, hardware and dock accessories for marine contractors, remodelers and homeowners. The owners, father and son Vic and Ron Paluck, told the newspaper they made so many deliveries to the Cape Coral it made sense to open a second location there.
Shoreline Lumber’s product mix has also shifted, according to the Palucks. Composites and wood alternatives now overshadow lumber sales in a 70/30 split, they said.
Measuring the foreclosure factor
For many years we have known that housing turnover is a positive force in driving the home improvement market. Homeowners tend to spend more heavily in the first year or two of owning a home to correct problems and to customize the house to their desires. In addition they also spend money fixing up their old houses for sale.
Lately housing turnover hasn’t been good news for the industry with sales of new homes and existing homes diving. Clearly this has been a part of the decline of the industry’s sales. The Home Improvement Research Institute’s (HIRI) most recent market estimates show a peak in 2006 at $306.1 billion and a low in 2009 of $267.3 billion. That is a 12.6% decline from peak to trough and an unprecedented three years of declines. (HIRI is forecasting 1.7% growth this year.)
But could there be a bit of a bright spot in all of this from an unlikely spot—foreclosures? Could foreclosures be good for the home improvement industry? This hypothesis is based on the assumption that distressed sales tend to involve homes in inferior condition. If there is a difference in condition, it could mean more home improvement work, and that yields additional industry sales.
HIRI recently released a report to its members that sheds light on the specifics of what is happening. The study titled “2010 Recent Home Buyer Report” included interviews with homeowners who had been in their current residence for a year or less. There were 1,205 of these folks interviewed, about equally split between those who bought new homes and those who bought existing homes. The study covers extensive information about what they did to their old homes to ready them for sale, what they did to their new homes and what plans they have for the next year or two. The details collected are too long to list here, but it is important to note that HIRI learned how homeowners viewed the condition of their home, how many projects they had done and how much they were spending per project.
Condition of the home
The recent home buyers were asked to rate the condition of their home when they moved in using a rating scale of 1 to 10 where 10 = like new, no work required, and 1 = complete renovation required prior to occupancy. While the results for new homes were about the same for distressed and normal sales, distressed sales of existing homes were rated significantly lower for their condition than their non-distressed sale counterparts. Just about double the number of people buying distressed homes gave a rating in the lower half (five or lower) than non-distressed homes (23.6% versus 12.4%). So the first part of the hypothesis is correct.
Projects done to the home
At an average of 4.13 projects, buyers of distressed existing homes report doing significantly more projects than buyers of non-distressed homes at 2.62 projects. Purchasers of new homes did not report a significant difference in the number of projects done between distressed and non-distressed sales.
Details were asked about the first two projects, including how much they spent. Buyers of existing homes spent an average per project of $3,167 on non-distressed houses, which was somewhat higher than the average project of $2,220 on distressed sale houses. New home purchasers spent more per project if the home was a distressed sale ($5,360) than those buyers of non-distressed homes ($3,261).
The End Result
Taking the above data and making adjustments for the length of time respondents were in their homes and then using the average amount spent on reported projects, a total spending per homeowner can be projected. The results of these calculations are shown to the left.
So what can we conclude regarding the impact of distressed sales?
People buying distressed homes do spend more than those buying non-distressed properties. This appears to be driven by homes that are in inferior condition.
Buyers of distressed existing homes spend less per project but do more projects yielding more spending.
Buyers of distressed new homes do about the same number of projects as for non-distressed homes, but the higher amount spent per project yields more spending in total.
So should we feel good about foreclosures? Clearly we should not, as foreclosures have hurt the industry by lowering home values. But there is a bit of a silver lining, as these homes garner more home improvement spending.
David Weekley honors pro dealers, vendors
Several of the industry’s pro dealers and suppliers were honored by David Weekley Homes July 27 in the national home builder’s annual “Partners of Choice” awards ceremony. Boise Engineered Wood Products, Dow Building Solutions, iLevel by Weyerhaeuser, James Hardie, Seacoast Supply (the southeastern division of L&W Supply) and Hunter Douglas were among those that won the highest “AA” designation, and among the pro dealers, BMC Select and Builders FirstSource both received an “A” in service.
“We’ve worked hard at keeping the attention on the service component,” said Bill Justus, VP supply chain services for David Weekley Homes. “Despite all the carnage [of the building downturn] and the downsizing, people still rose to the occasion and delivered world class service.”
The awards are based on David Weekley’s “National Trading Partner Survey,” in which approximately 600 of its team members—everyone from warranty service personnel to accounting clerks to purchasing agents—are surveyed and asked to evaluate trading partners. Consistent high marks are a must.
A sampling of the “additional comments” section shows that elusive truism about the LBM industry: local relationships seal the deal.
“Bucky Hinson [of Builders First Source] has blown me away with his service,” wrote one David Weekley employee in Charleston, S.C. And in Raleigh, another evaluator said: “Builders FirstSource does everything in its power to make its deliveries.”
In Austin, Texas, a David Weekly employee singled out two BMC Select workers, Jimmy Stulzman and Rafael Alaniz. “They are and understand that we are a team. This is one of my best suppliers.”
Two suppliers—Dow Building Solutions and James Hardie—received the “AA” designation six years in a row, meaning they were given an A in both quality and service by the David Weekley employees. Recognized with an “A” for quality were ABC Supply, Simpson Strong-Tie, DuPont, Owens Corning and Honeywell. For service, an A designation was given to Eaton Corp. and GAF-ELK.
When asked by Home Channel News if price enters the evaluations, Justus said: “If they’re doing business with us, they’re price competitive. It’s a ticket of entry.” Award winners tend to do business in most or all of the 14 cities where David Weekley builds homes.
Despite the size of the companies, Justus noted that “these companies through their local guys have learned how to personalize their service.”