
A half dozen LBM experts gave contrasting forecasts Oct. 5 over how much longer the current good economic times will last. Some participants at the Florida Building Material Association’s annual convention saw several more good years ahead, but others fretted about a coming downturn.
“The next 12 months are going to be fantastic, but I do have some great concerns,” said Wade Jefferson, president of Beaver Building Products, during the panel session in his home town of Orlando. “With mortgages, you can now get a 40-year mortgage. You can get mortgages with no money down. To me, it sounds real similar with 2008. Prices of housing are starting to get to the top, but it concerns me a lot. Everybody says ‘I remember. I won’t splurge.’ But I see people buying $70,000-$80,000 pickup trucks, $200,000 boats. … There’s a bubble brewing.”
Huttig CEO Jon Vrabely predicted housing will see more of the same, with total starts rising 5% to 6%per year. “And I don’t see that changing anytime in the next several years,” he said. “There are going to be constraints, be it labor or inflation. There is a fundamental lack of housing in this country today which is why house prices are escalating. Vacancy rates are as low as they’ve ever been.”
As for U.S. Lumber Executive Chairman Lawrence Newton, “The next 12-24 months and even the next 36 months will be fantastic. The U.S. economy may be as strong right now as we’ve seen in many years … In spite of a lack of cohesive [government] leadership, our economy chugs along. The big businesses in our country are so strong right now. Their earnings are great and their balance sheets are clean. And as long as they do that, our economy will move forward.”
The Atlanta-based executive conceded Jefferson’s point that personal spending is up. “As for a bubble, when people have success they want to spend money," he said. "But we are a long way from a bubble.”
As examples of that spending, Lee Morris, president of Durham Building Materials in Jacksonville, said he's seeeing it again and again with his remodeling customers. "These aren’t your normal $20,000 to $30,000 remodels," Morris said., "These are $200,000, $300,000 remodel jobs. The kids are gone. Couples are downsizing. They’re going from 3,000-square-foot homes to 1,800-, 2400-square-foot homes. All the builders are buying all the land available, if the environmentalists haven’t tied it up. … A lot of this stuff is out of our control. It’s just something we have to keep our eye on every day."
Darin Wood, president of Woodford Plywood in Albany, Ga., also sits on a local bank board. And while he expects steady growth over the next 12 to 18 months, he adds that “banks are getting very lax again.”
“I feel like the banking industry set the motion for this recession by making loans,” Wood said. “Our concern for the next three to five years, looking again at the loans banks are making, are we going to return to what we had, with people turning keys over to the banks?”
Vrabely agreed. “We could be heading toward more problems as a result of greed, to be frank. It was the financial markets, truly the financial markets, that drove us the cliff we fell off of in September-October 2008. We could be heading back there.”