Attention Shoppers

Let it be known. Here at Dakeryn we are not opposed to “showrooming” — in fact we encourage it!
In case you haven’t heard, “showrooming” is the practice that has evidently taken off since shoppers began carrying smart phones. It’s said that shoppers take a good look at a product in a ‘real’ store, then immediately use a mobile device to find out where it can be purchased for less. Many Future Shop and Best Buy locations across Canada have blamed recent closures on showrooming. Now, one fed-up retailer in Australia has begun charging ‘browsers’ $5.00 to browse his inventory (see story here).
I wonder if this is a sign of things to come in the lumber business? Is it conceivable that the supercycle could lead to sawmills introducing a ‘cover charge’ to browse mill offering lists? What about customers calling in to ‘real’ stocking-wholesalers simply to ‘browse’ the day’s offerings?  Of course, if price were the only determining factor in the buyers’ buying decision, “showrooming’ might concern us. Meanwhile, we love it when ‘woodbe’ customers call in to browse…

No Swimming Pools

With the U.S. housing market recovery in full swing, reports differ as to how much of the current buying activity is investor-driven. Today The Wall Street Journal offers some hard data:
“Currently, cash buyers—largely investors—make up about 32% of sales nationally, according to the National Association of Realtors. In Southern California, a favorite target for investors, absentee buyers accounted for 31.4% of purchases last month, up from an average of less than 17% between 2000 and 2010, according to DataQuick MDA, a real-estate research firm. While some firms have focused only on Sunbelt markets with newer housing stock, others are branching out. American Residential Properties Inc., which began amassing hundreds of homes in Phoenix four years ago, earlier this month bought 93 homes in Chicago’s southern suburbs, bringing its total there to around 300.”

No doubt speculative excitement in many U.S. housing markets “helped set a floor”. Now, with house prices climbing, that excitement is expected to spill over into consumer spending since “more American homeowners will be able to use their properties as cash machines again.” As for any questions as to how those types of cash advances work, the tapped out Canadian consumer is well-versed on the HELOC model. (Give us a call?)

Some of Mr. Pintar’s investors have him steer clear of certain homes, such as those with swimming pools, which require extra maintenance that isn’t covered by higher rent. He focuses on neighborhoods that have low crime and good schools and are near freeways and shopping areas. Mr. Pintar said he has no plans to slow down. In the past four months, the professional landlord hired 75 new employees. He also looked into buying his own commercial office building for his growing operation. “We figured why pay rent to someone if you don’t have to?” – WSJ

Fire Forecast

News over the weekend came in the form of a warning, scrolling local TV channels courtesy of B.C. foresters; one fifth of B.C.’s working forest is at risk for major wildfires “never seen before in this province” due to dangerously high levels of fire fuels resulting from MPB-killed wood. A fired up John Betts of the Western Silvicultural Association likely won’t be accused of understating the threat to timber supply posed by forest fires: “They’re going to be of increasing severity in frequency, they’re going to be larger, they’re going to move faster across the landscape, they’re going to take out whatever’s in front of them, including our parks, our inventory, our transmission cords, our water sheds, and even some of our communities. I’m afraid that’s in the future, it’s not just being forecast here, it’s happening in other jurisdictions, and we’re going to see that happen here. We need to be preparing for that.”

Volatility

Even though home prices in the U.S. have risen significantly in the last year, the gap between buying and renting has narrowed only slightly. Real estate blog Trulia explains:
“One year ago, buying was 46% cheaper than renting. Today’s it’s 44% cheaper to buy versus rent. In fact, home ownership is cheaper than renting in all of America’s 100 largest metros. That’s because falling mortgage rates have kept buying almost as affordable, relative to renting, as it was last year.

We just saw a story on CNBC here in the office questioning the sustainability of present housing activity. Why? Because as posted back in January (see Accelerated Purchases), large institutional investors account for a fair chunk of the action. They buy the homes and then rent them out. Based on the fact that it’s still 44% cheaper to buy than rent, might there be cracks already developing in that strategy?

When can you start?

Challenges surrounding skilled labor shortages presently in the forest industry, particularly in B.C. and Alberta, are well-known. Now a new report in The New York Times tells us that after six years of declining construction, home builders south of the border are confronted with exactly the same kind of skilled labor constraints. In California, many workers in the immigrant-heavy industry have left the area.  And just like many Canadian workers who left the forest for the oil patch in recent years, the energy boom in Texas has reportedly been a similarly lucrative job magnet. Still others who chose not to move away “often switched to medical data entry, U.P.S. delivery services, or anything else that they could find. Or they filed for disability and dropped out the labor force altogether.”

Interestingly, builders themselves are now experiencing bottlenecks in surprising places brought about by – you guessed it – labor shortages: “’You walk into the permit office, and it’s like a ghost town in there,’ said Michael Haemmig, president of Haemmig Construction in Nevada City, Calif., about an hour north of Sacramento. He says local governments were caught off-guard by the suddenly renewed interest in building and do not have enough people in place to handle the paperwork. ‘This being California, we have more regulations and permits than ever, and it takes more time to get each permit approved,’ he said.”
Full Story

“If we could build 500 houses right now, could we sell them? Possibly, but I don’t want to sell all my lots that I’ve held on to forever and have to give them away at these prices. We lost money for a lot of years, and I’d like to make some money for a change. I’m not building because I need the practice.” – Harry Elliott III, Elliott Homes

House Party?

It’s probably true that lumber traders mostly enjoy stories having anything to do with the housing market. After all, we’re in the wood business. More houses in the works? More lumber to be sold. At least that’s the theory. The stories of Canada’s recent housing market however, point to complexities – even disconnect among regional market variables, not to mention government policies aiming to curb overheating, assist realtors in diffusing any ‘bubble’ talk. While sales are now falling in every major housing market across Canada, in contrast, the rebounding U.S. real estate market has been well-documented at Harderblog. Says The Financial Post here: “After almost six years of crashing, burning, and stagnating, the U.S. housing market is finally shooting higher. Coincidentally, this steady warming trend is occurring as Canadian housing prices are cooling and, according to a recent TD Bank report, are set to be all-but-frozen for the next decade.”

Red Carpet Glitter – Harderblog with Joan Rivers (?)

I learned more about the U.S. housing outlook last week, when Dakeryn joined over 400 other manufacturers and distributors in the building materials industry at the LMC Annual in Anaheim, California. LMC now has member retail lumber yards in all 50 states; over 400 dealer representatives attended their show. Talk about a solid cross-section where gauging market sentiment is concerned – if there had been an ‘optimism meter’ on the vibrant show floor, it might have exploded. With order files stretching 3-4 weeks, major western lumber producers arrived at the show with big new exhibits (lagging indicator?) but little wood. Dealer outlook was all positive, with spring demand projected to keep markets tight into May. Truckload and LTL fill-in business is expected to intensify, as both procurement and risk teeter in the minds of anyone buying wood products today. Traders will be closely monitoring fresh U.S. housing data due this week, including starts tomorrow and existing home sales Thursday.