- Oops!Something went wrong.Please try again later.
Dave Flitman, Builders FirstSource President and CEO, joined Yahoo Finance to discuss where the price of lumber and other commodities might be headed next.
ADAM SHAPIRO: We've been talking a lot about the skyrocketing prices for the things needed to build a house like copper, lumber. Let's bring into the stream somebody who knows firsthand what's really going on in the market, and that would be the Builders FirstSource president and CEO, Dave Flitman He's joining us now. And Dave, I've got to ask you-- I'm amazed because it's silent at my apartment. They're renovating above, and it would have been perfect all the hammering that's been going on because they can hear it over the microphone in the show.
Where do we stand right now? We saw lumber prices skyrocket, then they started to come back down. Are we ever getting back to the prices before the pandemic?
DAVE FLITMAN: Great question, Adam. I'm actually not quite sure of that. And I think you need to put the whole lumber run-up and then the decline that we've seen in recent weeks into perspective. And this really started ahead of the pandemic. And I think what people fail to remember is that in the first quarter of 2020, just prior to the pandemic, we were hitting a rate of almost 1 million single-family homes being constructed in the country, really, for the first time in about 14 years since before the Great Financial Crisis.
And so the underlying demand in homebuilding was very strong. Then the pandemic hit. And then coming out of that, we had two effects. One was single-family home construction actually accelerated because people appreciated and realized, given the pandemic and work from home, they could live wherever they wanted, so they made the choice to move. Those who didn't decided it might be time to remodel their existing home. And so we saw a double whammy on demand for lumber.
And coming out of that, demand remains very, very strong. We saw lumber prices peak about two months ago in the first part of May at about $1,600 per 1,000 board feet. It's declined significantly in the past four or five weeks. It finished last week just under $700. But I think it's important to keep in mind that that is still-- at $700, still about twice the historical rate for the cost of lumber. And I just think that underscores just how strong the underlying demand remains.
- And Dave, when it comes to the housing market, of course, with every economic data point we've been getting on housing, things like tight inventory levels and more difficult affordability with home prices rising have both been cited. And I'm wondering what your outlook is on these trends and when we'll start to see a little bit of attenuation on both of those pressure points.
DAVE FLITMAN: Yeah, great question. I think we're starting to see some of that now, in fact. And what you've seen happen over the course of the last couple of months is you've seen homebuilders actually slow their starts, their new single-family starts. And I think it's in large part to give the overall supply chain a little bit of breathing room and a chance to catch up. Because just like lumber, we've seen that same demand increase and availability challenge and supply in just about every other area of home construction, whether it's cabinets, whether it's windows, doors, you name it. It's difficult to get. I've even heard many builders speak about their inability to get appliances and that holding up closings on new homes.
- Dave, we should point out too that Builders FirstSource, publicly traded. Your stock closed up today almost 3%. And you are the largest supplier of building products for residential construction in the United States. What are you seeing? Are you seeing the demand for the starter home, for the larger home, or multifamily? Where are the materials really going?
DAVE FLITMAN: Yeah. Actually, the company was reconstituted recently. We just completed the merger of Builders FirstSource with BMC, so it was really the largest merger the industry had seen. That deal closed in January, and so we're about seven months into it. We've got a great footprint. We're in 40 states across the country, about 550 locations. So we've got a pretty good pulse on what's going on around the country.
And what I can tell you is demand remains very robust. If you look at the trailing trend of just the last three months in new home permits, they're up double digits in all states across the country. And importantly, if you take out the pandemic year last year-- because I think it changes the numbers a bit-- if you just compare that trailing three months to 2019, new home permits are up 41%. I think we've seen a shift in demand to millennials. We've got something like 85 to 90 million millennials that are now in the home-buying market that weren't back 10, 12 years ago. And that's creating a lot of underlying demand. And to your point, we have seen the average size of new homes shrink, really, over the last four or five years to about 2,300 square feet now.
ADAM SHAPIRO: That's really-- so they've been shrinking over the last couple of years, but shouldn't they be expanding? If the work-from-home phenomenon is here to stay and if the millennials are now in their family formation years-- and we should point out that the generation right behind them is also coming into the home-buying phase-- shouldn't the size be growing?
DAVE FLITMAN: I think we may see that trend reverse. In fact, in the last couple of months, we have seen it level off and actually begin to increase again. So we've seen that five-year or so trend of decline. It may be, to your point, starting to turn around, even as we speak.
ADAM SHAPIRO: I hope you'll consider coming back. It's always good to have someone who's actually in it when we're talking about what's going on with commodity prices and the homebuilding sector. So Dave Flitman, Builders FirstSource president and CEO, thank you for enlightening us today.