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Don’t Forget! You Saw it in the
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July 2024 #16300 Page #98
Paddling Hard But Moving Slow: Increasingly, That’s LBM’s Outlook for the Rest of 2024 Craig Webb President, Webb Analytics
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fter years in which dealers struggled from crisis to crisis, a slew of public reports and economic indicators suggest we can expect many more months of muddling along. Our surfing metaphor of two years ago has given way to the paddleboard, where the only way to speed up is to paddle harder.
Core organic sales were essentially flat at Builders FirstSource during its first quarter, and the 6% sales gain in base business sales that it forecasts for all 2024 comes in good part from acquisitions. Beacon also is predicting mid-single-digit revenue gains this year, again largely from acquisitions. Meanwhile, The Home Depot predicts total sales growth of only 1% in the 12 months ending next January, and that’s in part because FY2024 includes a 53rd week of sales. Why the placid pace? We’re done with the COVID shocks, and lumber prices aren’t on a roller-coaster path any longer. Single-family gains are partly offset by declines in multi-family work. Custom home work is steady, though, as one dealer put it, more plans are coming in but homeowners are taking a longer time to authorize construction. Meanwhile, the home improvement frenzy of recent years has been supplanted to signs that people are thinking twice before they decide on bigger purchases. More recently, conditions are sluggish because the Federal Reserve appears increasingly likely to refrain from cutting its lending rates until fall at the earliest, and make fewer cuts this year than previously expected. That’s because the inflation rate isn’t receding at the Fed’s hoped-for pace. Reports of price hikes “were higher than I think anybody expected,” Fed Chair Jerome Powell said May 14. “What that has told us is that we’ll need to be patient and let restrictive policy do its work ... keeping policy at the current rate for longer than had been thought.” Powell spoke a day before the federal Labor Department announced that the Consumer Price Index rose 3.4% in April from a year earlier and 0.3% from March. Both are lower numbers than we’ve seen so far this year, but one month’s worth of data is not enough on its own to persuade the Fed to ease up. Some economists, and a lot of speculators on Wall Street, had been looking forward to rate cuts as early as mid-year. Once the Fed moves, mortgage rates (at 6.99% as of May 15, according to Mortgage News Daily) are expected to start a steady march downward, thus opening the door to millions more Americans to buy homes. Remodelers are expected to benefit from a sales surge, too, because the year after a home purchase is one of the biggest for repair and remodeling expenditures. That increasing pressure – “like holding a beach ball underwater” – can’t happen until the Fed acts. Until then, people won’t move. A lukewarm economy will be the status quo. Continued next page
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