Joe Hardy
Joe Hardy

The founder of 84 Lumber predicted today that housing starts would rise to perhaps 700,000 next year but added that the glut of existing homes on the market has to shrink before the starts number can rise further.

In an interview with the CNBC cable network from Pittsburgh, site of the G20 economic summit, Joe Hardy also said 84 has moved more toward commercial sales and might be forming an international division in the near future. He didn't elaborate.

"For us, because we are selling to just contractors, it's been tough," Hardy said. "This is a time you cannot be sentimental."

Hardy pointed to 1.8 million housing starts two years ago plummeting to 300,000 this past March, as having a profound impact on 84, the fourth-biggest operation on the 2009 ProSales 100. "Our company has done some dramatic things to be, I think, a lot better in the future," Hardy said. "The people of 84 took it on."

Aside from closing yards and laying people off, Hardy said the company has moved toward more commercial sales and might be forming an international division in the near future. In the past year, 84 Lumber closed more than 80 locations and cut in half a staff of about 9,500 employees.

A 15-month supply in housing needs to diminish before housing starts can grow again, according to Hardy. "I would think going into next year that (housing starts) will go up to 600,000, maybe 700,000," he said. Last week, the government announced that privately owned housing starts inched up 1.5% in August from July to seasonally adjusted annual rate of 598,000, but within that total, starts for single-family homes slipped 3% to 479,000.

Hardy stressed that, along with starts, the rate of demand also matters greatly.

"You need to have a five-month supply," he said. "When you get that five-month supply, then you are going to get a million starts again. ... They have to be digested."

The executive's comments came just hours before the federal government reported that new residential sales of single-family homes climbed 0.7% in August to a 429,000 annual rate. At that rate, the supply of new homes outstanding has dropped from about a 12-month supply to 7.3 months, the government said.

Regarding prices, Hardy pointed out that oriented strand board is at about $2 per sheet. "Two years ago it was at $25 a sheet and you couldn't get it," he said.