Welcome to this month's Supply Side News, the newsletter focused solely on providing critical information and actions for lowering costs in homebuilding.
The cost of lumber and plywood continue to rise, up 33% over last month and 111% over a year ago. That translates into an increase of over $2,000 and $4,400 for our average 2,000 square foot home. We are now 12% above the 10 year average for lumber and 34% below the peak that was reached in 2004. See the lumber cost tracker
Drywall costs are still expected to rise in the months ahead given the price increases announced by USG and National Gypsum in February. However, a modest decrease was seen this past month as dealers continue to work through inventory.
"Cloud Computing" and buying and using "Software as a Service" will significantly change the competitive landscape for builders that take advantage of these capabilities. Today, a builder can leverage advanced systems that would be cost prohibitive to own from the "Cloud" (Internet), use and pay for what they need, and significantly lower costs and improve efficiency. Check out this month's "Cloud Computing"
"Going Green" and PAPERLESS got an additional boost when the FHA announced that they will accept electronic signatures for real estate contracts. Consider the adoption of a NO PAPER
policy, help the environment AND gain the efficiencies that surround a paperless world. To learn more, see NO PAPER
to the right.
this newsletter to your colleagues who are also interested in managing and lowering costs.
|In the News|
Information On Costs & Actions To Lower Them
FHA will accept electronic signatures on real estate sales contracts
Economic Advisors Janke says factors that drove price hikes are fading
While there is belief current prices will drop, people thought that in 2004 too
Concrete Cost +.9% vs. April, up 2.6% vs Yr Ago
Modest cost increase of .9% over last month
|Cost-Saving Tip - "Cloud Computing"
"Systems as a Service" & "Cloud Computing" - What does it mean for a homebuilder?|
According to Wikipedia, "Cloud Computing" is Internet based computing, whereby shared computing power, systems administration, software and information are provided to computers and other devices on demand, like the electricity grid.
What does "Cloud Computing" mean for a builder? It means that in today's world no builder would think about generating their own power and electricity, builders should consider not providing, building, maintaining or managing their own systems. There are several companies who provide very advanced, fully integrated builder management systems that can come from the "Cloud" as a service.
What are the results? Lower computer and systems costs, more efficient operations and greater profits. Fully integrated "Cloud" solutions are available for:
- Lead prospecting & management
- Sales contracting & option selection
- Bidding & contracting
- Project management & scheduling
- Rebate program management
- Customer service & warranty
- Email, shared calendars & contacts
- Sophisticated telephony
Thus, the smallest builder can have the capabilities that would rival the largest builders or companies in the nation. We can evaluate the systems you currently use and help to show you the benefits of "Cloud Computing" and buying "software as a service."
We can show you our offering, SystemOneTM
, that can highlight how all of this works in a pre-implemented, pre-configured solution for homebuilders. For more information, contact us
Action: Explore opportunities to leverage highly integrated and advanced, yet simple to use "Cloud" based systems and evaluate the impact they can have on your bottom-line.
|BSC Drywall Cost TrackerDrywall cost decreased slightly in April on average 2.3%
|The price of a sheet of 4' x 12' x 1/2" drywall is now $9.07, down from $9.34 in April. For an average house that uses 122 sheets, that is a current material cost of $1,105, down $33/home or -2.3%.
Both USG & National Gypsum had announced 20% price increases to their distributors in February, so continued increases should be expected as dealers work through lower cost inventory.
Action: Try to hold the line on price increases, explore price locks.
|BSC Lumber Cost Tracker|
Lumber prices were up 33% vs last month, extreme volatility expected to continue in the months ahead
|Lumber prices shot up across the board this month, with the most significant increases being on OSB which was up 54% vs. last month for our composite.
Source: Random Lengths, local market pricing, & BSC analysis for a sample house pack of dimensional, OSB & stud lumber for a two-story, 2,030 sq/ft home
A nationwide shortage fueled a buying frenzy that mills struggled to keep up with. Mills were forced to get defensive and ratchet up prices in an attempt to manage demand based on their still reduced production schedules. These price increases were constant and extreme throughout the month, but only started having an effect the final week as demand started to cool to the point were production was able to begin catching up back up with demand.
To put the mill production capacity limitation in perspective:
- 12 mills have closed since 2008
- It is estimated to cost $30M and 6-9 months to re-open a mill
- Experts speculate that housing starts have to get back to +1M annually in the US before producers will re-open mills
Bottom Line: Continue to brace for a volatile lumber market marred by shortages and wild price swings.
Historical Perspective: The Random Lengths composite is now 12% above its 10 year average and 34% below the highs experienced in 2004.
Lumber futures are still up over current prices indicating further increases are expected. Many experts believe that the run-up in April was so severe that its sustainability is questioned. See the two articles listed in the "News" section.
Action: Consider changing the purchasing model to a cost based one, and longer-term locks/commitments to buy on lumber purchases. BSC has saved builders 8% to 11% on lumber using these techniques.
If you would like us to do an analysis of potential lumber cost savings based on your lumber purchase history, contact us.
|BSC Ready-Mix Concrete Cost TrackerPrices rise slightly +.9% from last month, and up only 2.6% over a year ago
|The price of 3,000 psi Ready-Mix was up a modest 0.9% this past month, up only 2.6% over a year ago. A slab on grade, 4" pad for an average size 2 1/2 story home and driveway costs $9,260 for 97cy, and is up $80 over last month.|
Action: Continue to look for labor discounts from foundation contractors as competition remains intense for work.
|From The Supply Side - Color VisualizationSherwin Williams has a tool to allow builders & their homebuyers to see what a room will look like painted
|In today's world, the ability to meet the needs of demanding buyers can be the difference between getting a sale or losing a sale to someone else. What if you had a low risk way to offer many paint upgrades without the stress of determining what looks good and what does not?
Sherwin Williams provides a solution that will enable a builder to upload an image or rendering of a home and allow for experimentation of various paint color choices. You can view color visualization on their site.
For more information on exploring the advantages of the Sherwin Williams Color Visualizer from the experts at Sherwin Williams, contact us.
Nation's Largest Cost Management & Information Technology Group For Builders
Builder Sourcing is a professional services firm that works with builders to lower costs, including understanding and removing costs from the supply chain & streamlining operations through the use of advanced systems and technology.
Builder Sourcing streamlines and increases value from manufacturers' rebate and incentive programs, and lowers general and administrative costs.
For more information, visit www.buildersourcing.com.
Implement a NO PAPER policy in your operation, made possible with electronic signatures.
- Eliminate costs related to printing & managing paper
- Close more deals in minutes, not days
- Make it easier for customers & subs to sign & return documents
- Be more "Green", reduce environmental impact & make more "Green"
We have a new program for those interested in adopting a NO PAPER policy, affordable to builders of all sizes.
|Discount Office Products|
We save builders $100s to $1,000s a month on office products & supplies. To learn more, click here.
|Rebate Program Management|
Builder Sourcing has increased money from rebate programs as much as $2,500/home.
For more information, contact us.
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A $60 value! To learn more, click here.
Try a discount program, and get to know us better, click a link below.