Brothers expect purchase of Andale Lumber to pay off
07/07/2013 7:47 AM
07/07/2013 7:47 AM
Considering that home construction was in a depression for most of the past four years, Joe and Jack Fisher took what might seem a sizable risk when they decided to buy Andale Lumber last year.
But the Fishers know lumber. They’re second-generation owners of Garden Plain Lumber and have been in the business for decades. They looked at it as smart, not risky. It allowed them to spread costs, regain a rail connection and offer new products to more customers.
And, the home construction market’s beginning to rebound, they say.
They are already seeing an uptick. They estimate their sales are up 20 percent from last year, not including revenue from Andale Lumber.
“That seems like a lot until you realize how much it fell five years ago,” Joe Fisher said.
He estimated that, at the bottom, business was down about 60 percent compared to the end of 2007.
It’s been a rough few years in the industry – marked by the disappearance of lumber producers, wholesalers and retailers that had expanded to supply the lumber needed to produce nearly 2 million houses nationwide in 2006. Five years later, housing starts had shrunk to only 30 percent of that number.
Locally, there have been some casualties. Associated Lumber closed this spring. Star Lumber closed retail locations in Salina and Hutchinson.
Even the survivors had to make cuts, often laying off staff.
Patrick Goebel, president of Star Lumber, said the company decided to close its Salina store and serve area contractors by delivery truck from Star’s new store in Manhattan. It worked so well, they closed the store in Hutchinson and supplied area contractors by delivering by truck from Wichita.
“The downturn was very challenging for a lot of organizations, and we were forced to look at everything we could,” Goebel said. “We tried to deliver better customer service with fewer people. It was a challenging time and forced us to become more efficient.”
Goebel said the economics of the lumber sales business are pretty simple. As goes residential construction, so goes the local lumber industry.
And the news is encouraging. Building permits in Sedgwick County are up about 35 percent from a year ago. Goebel said that his business is up about the same.
Menard’s has opened two stores in Wichita, although it tends to be more oriented to individual homeowners than professionals.
Ultimately, said several local lumbermen, the lumber industry has been changing and consolidating for decades. And what’s available in the Wichita area is fairly close to what was available before the downturn.
The cost has been great.
On a tour of the facility with the Fishers and Pat Reichenberger, the longtime owner of Andale Lumber who is still the manager, they said the downturn was a bit of a shock. The key to their survival is that most of their builder customers weren’t so overextended that they went bankrupt carrying large debts to the lumberyards.
“It happened a lot quicker and lasted a lot longer than I thought it would,” Reichenberger said of the slump in the housing market.
“Early in ’09 we were in a seminar in Wichita and were told that it would be at least until 2010 before housing would come back,” Joe said and laughed. “2010 got here and it wasn’t doing anything.”
“The biggest thing was not knowing,” Reichenberger said.
There remains plenty of wrong guesses and volatility in the industry. Many in the nation bet on a strong rebound in housing in 2013 and bought up enough lumber to drive prices way up.
But the rebound wasn’t as strong as expected. Growth in China slowed and some production came back on line, said Harold Baalman, owner of B&B Lumber. The price of lumber and plywood has fallen 25 percent since late March.
The man who delivered that forecast in 2009, Stan Longhofer, director of the Center of Real Estate at Wichita State University, said he is more confident today about a housing rebound now.
Homebuilders still face bankers who are reluctant to lend for speculative building, he said. Bankers were burned for being too lax in lending during the run-up to the recession and had to answer to both regulators and unhappy shareholders.
“You can understand where they are coming from, but it sure makes it hard to do new home construction,” Longhofer said.
There is pent-up demand for new homes, Longhofer said. And as the sale of existing homes rises in the Wichita area, it will lead bankers to relax on the lending for new houses.
“But when is the big question,” Longhofer said.