LAS VEGAS — The housing market recovery with all of its optimism, its forecasts of 20% increases and its clear path to 1 million starts had plenty of people smiling at the International Builders' Show.
It also had some people thinking, and maybe worrying. The causes of concern include scarcity of product and the idea that delivering the product to a market returning to normalcy may come with shocks to the system.
Granted, in the aftermath of record lows in home building (and home improvement spending) the idea of a boom-driven scarcity falls squarely in the category of "good problem to have." But that doesn't mean it's not still a problem.
This problem was the topic of discussion here in Las Vegas during IBS at a meeting of the Presidents Council, a business group of hardware and LBM executives, distributors and retailers.
"Simply put, there is not the capacity of lumber production to return to the historical levels that we saw before," said Wayne Guthrie, who as the senior VP sales and marketing for forest products giant Canfor has a front-row seat on raw material trends. "On top of that we have had environmental issues and other cutbacks in certain lumber producing areas that will restrict them."
Make no mistake: The mood of the Builders' Show, and of builders in general, was upbeat. But then again, the recovery brings supply chain challenges.
"When builders ask me about 2013, I try to temper their optimism a bit," said Tony Callahan, formerly an executive of a major builder, now CEO of Callahan Consultant Group. "I think you're going to have higher costs, tighter skilled labor and more government regulations."
A risk to the recovery is the possibility that raw material prices will "crank up too fast," slowing down the recovery itself. That is a real possibility given that a lot of builders have four- to sixth-month backlogs, with a lot of the pricing unprotected, Callahan said.
"Lumber prices are definitely on the rise," Guthrie said. "It was a little intimidating when I saw the No. 1 concern [among builders] is higher material costs."
Guthrie said history is about to repeat itself. Lumber prices peaked in 2004 — a full two years before the peak demand kicked in. The reason for the early peak? "The supply chain simply broke down," Guthrie said. "We had the lumber. We just coul