There’s no crying in lumber! You all remember the scene. The baseball player approaches the dugout and Tom Hanks, the has-been-slugger-turned-manager, tells his player, “Crying? Are you crying?!? There’s no crying in baseball!” There’s no crying in lumber either.
There are no real lumber emergencies. Sure, there are lot of contractors screaming and clamoring for attention, but is that really a bad thing? Nobody is dying and nobody is really getting hurt until they rush irrationally and sacrifice safety protocols. In other words, calm in the storm is the best approach.
Last month I suggested that it’s time to leverage the moment. I reiterate the sentiment and would like to share a perspective this month on the “dire” news of the construction industry and why it is good for business. Every gray cloud has a silver lining.
Housing inventory is low. You have to live in a mud hut to not hear the dire news about housing inventories. In a previous LBM Journal report, we shared that 39% of all homes sold above list during a four-week period. Current inventory, normally hovering near a six-month’s supply in the millions, is now at a 90-day supply hovering near 600,000.
The silver lining: This means that the market for new homes will be robust for the foreseeable future.
Product scarcity is surreal. Few if any industry veterans can remember a time like this in the past. The pandemic created caution to slow manufacturing and layoff workers. Oops! Instead, the industry boomed which created shortages of lumber, resins, drywall, metals, and just about every other commodity needed to build a home. This caused a ripple effect of soaring material costs.
The silver lining: There is little reason to reduce your margins at this time and ample reason to allocate resources to your most highly valued customers and prospects.
Lead times are surrealer. I figure if I’m going to use the word “surreal,” I can invent a surreal new word (surrealer). The most profound example might be the window industry where lead times have soared to six weeks for the rare and most efficient supplier to six months for others.
The silver lining: You are not alone and a victim. Instead, you have the opportunity to distinguish yourself as a consultative partner by meeting with clients to schedule project needs well in advance to ensure they’re in the manufacturer’s production scheduling queue.
It is a lot more difficult today than it was during the last boom. The only reason we’re not building houses at the 2005 rate is due to the shortage of materials. Demand for materials in 2005 was easily fulfilled and, truth be told, salespeople didn’t need to be very skilled. I remember standing on a jobsite when a builder cussed at a salesman because of the sudden, dramatic rise in OSB pricing. After he got done yelling, he asked, “How soon can I get it?” In 2005, the answer was “right away.” In 2021, it’s not such an easy answer.
The silver lining: The current market conditions present a unique opportunity to truly differentiate your sales skills.
If you’re too focused on the negative news, you’re missing the big opportunity of a bull run…with caveats. In today’s market, salespeople have to work on their planning, presentation, and negotiation skills. This is not a time for “order-takers” to wait for the phone to ring with the next emergency. It is a time to demonstrate the calm that others lack in a storm. It is a time to host regular dialogues with clients to set expectations and hold your margins as compensation for the good work you do.
The building industry is going strong and our only challenge is having to deliver difficult news with a smile as we reap record sales and profits. It’s good to be in the LBM industry right now. There’s no crying in lumber!