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  • rcdt999 rcdt999 Mar 19, 2008 10:09 PM Flag

    Suppliers getting squeezed

    Hunt for business a little more anxious at Builder Mart
    Slump in housing spills on suppliers
    By Jamie Smith Hopkins | Sun reporter
    8:08 PM EDT, March 19, 2008

    That's the tough reality for homebuilder suppliers, many of which are feeling the housing downturn as keenly as their cli ents. Permits for new residential units in the metro area were down 45 percent last year compared with 2005, according to the Baltimore Metropolitan Council, which means a lot less demand for trusses -- plus windows, doors, carpeting, countertops and everything else builders need.

    "It's a pretty big ripple effect," said Joe Hikel, chief operating officer and co-owner of Shelter Systems, who feels fortunate that his company also sells to the stronger commercial market. "If we relied just on residen tial homebuilding, it would be a lot worse."

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    Shelter Systems and 288 other suppliers turned out for the annual Builder Mart in Timonium Wednesday, looking for business in these lean times. More got booths last year -- but then more were still in business last year, noted John E. Kortecamp, executive vice president of the Home Builders Association of Maryland, which organized the trade show.

    "The cuts have been significant across the board in the supplier ranks," he said. "It's hit everywhere."

    M. Kent Thomas, co-chair of the construction services group with KAWG&F, which does accounting, tax returns and consulting for local building contractors and suppliers, said everyone selling to homebuilders will "need to find alternative types of work."

    "The next couple of years are going to be quite challenging for our contractors," he said.

    It's not only that work is scarcer, said Bernard M. Markstein, senior economist with the National Association of Home Builders. Suppliers are also making less money -- or even taking small losses -- on the jobs they're landing.

    "It's been a squeeze on homebuilders, and the homebuilders have translated that squeeze on their suppliers," Markstein said. "They say, 'Look, I can't pay these prices.' If there's any positive in this, it's for the homebuyer who can afford to move."

    Some material costs have plummeted. Lumber prices dropped from $475 per 1,000 board feet in the middle of 2004 to about $238 for the same amount last week, Markstein said.

    But some material prices are still rising, either because they're also used by industries with stronger demand or because they're at the mercy of oil costs. Take asphalt, which is made from petroleum and requires gas-guzzling equipment to lay down. Pavement contractors are stuck between a rock and a hard place: penny-pinching builders and homeowners on the one hand, and on the other, material prices jumping along with oil.

    "You can't even get a supplier to guess at what materials are going to cost in July," said Don Turner, executive director of the National Pavement Contractors Association.

    The state homebuilders group, which has put on Builder Mart since 1971, said this was the first year in the last 11 that the Mid-Atlantic event hasn't seen an increase in the number of exhibitors and attendees.

    More than 7,000 builders, de velopers, remodelers and their employees turned out last year to look at suppliers' wares; by midafternoon Wednesday, there were just over 6,000.

    Even so, the Maryland State Fairgrounds' Cow Palace was packed with booths. Suppliers wanted to convince potential customers that their products were better and more cost-effective, lest their competitors do so.

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