Opportunities from change

By William E. Baugh President William E. Baugh & Associates

lf lS not newsworthy to point out Ithat the building supply industry is struggling. We are, and have been, in a recession that has reduced consumer spending and confidence and created rigid credit policies. The result is an extremely low level of housing and commercial construction. Lagging starts will probably continue.

Products that senerate sales are directly linked to new housing and, to a lesser extent, remodeling and d-i-y markets. To protect the future, we must examine the "derived demand" characteristics of building supply sales.

Housing activity stalled as we

evolved into a glut economy. The pent up demand caused by World War II and the "baby boom" entered a new phase of demographics with a "baby bust." Most baby boomers are now housed with young children who will not form families in the immediate future.

Much publicity has been given to the concept that if long term interest rates were reduced, homebuilding and sales would rebound. However, other factors negate this solution: high consumer debt, low consumer confidence, difficult affordability, reduced leverage for developers and fewer potential buyers.

Second homes for people of retirement age will continue at a pace equivalent to past activity. These potential buyers will be the wealthiest generation on record.

Our industry serves two markets, the contractor and the do-it-yourselfer, but they have changed. Management needs to grasp the opportunities change has created. Aggressive mar-