Builder business is slow…for some.

I have talked to alot of my friends that are in the builder business. These particular types of builders focus on new construction and typically build in tracts which are in the 50-150 lots per tract. (sometimes 200)

Anyway for the last 5-8 years there has been a ton of pressure on builders to make sure they continue to grow their businesses. At the very same time subcontractors have been pressured to keep up with massive growth across the country.

I was talking to the COO of a major southwest regional player (1200+ units per year) and he told me a story about price appreciation that came along with the pressures of growing and growing. Basically the story goes, one day he gets a call from his framers. All of his guys are going to walk unless they get something like a 20% raise + a retention bonus because a National Builder (10,000+ homes) made them the same offer. Well losing framers on a massive scale (think 20-30 crews) would be literally a show stopper. After verifying the competitive offer the builder agreed to increase the subcontractors rates to accommodate the higher labor costs.

I was talking to the CEO of a National Builder based in the northeast and he told a similar story about last minute situations where contracts were signed, but the subs basically walked off the job or would be terrible at scheduling until the contracts were increased to meet demand.

Now multiply this by every trade in every region for every builder for 4-5 years.

As each of the above described changes, increases or other price pressures came to light the builder be forced to bear the cost and then in turn would of course just increase the price of the home.

For years that worked.

Today’s situation is the opposite of the above stories. All of the capacity that was built during the boom far exceeds the current demand. Which means the price for services continues to drop which helps keep housing prices level or even in some regions going down lower.

The reason I mention it is because as the leading VALUE player in flooring we have alot of these types of businesses now becoming customers because they need to get more for their money. And happily that is how our business is set up. So for some the builder business seems slow – but for us it is exploding! (before builders were less about VALUE and more about getting someone to complete the job) Today they MUST have value. So in turn they must have iFLOOR. 😉