Unsold homes hurt logging industry

JACKSON, Miss. — The glut of homes in foreclosure, vacant, or stuck on the market has the nation's lumber industry out on a limb.

Since housing starts hit their peak in mid-2005, demand for lumber used in floors, home frames, and cabinets has declined sharply, and experts say the number of unsold homes would need to significantly decrease before homebuilders commit to building new ones.

With fewer new houses under construction, and foreclosure notices surging this summer, there's a lot at stake for the sawmills and loggers that feed the nation's dwindling appetite for floorboard, housing frames and cabinets.

The industry, which employs more than 100,000 workers, has seen employment drop 13 percent the last three years, according to government data. Millions of private landowners that manage family owned timberlands also depend on the lumber industry.

Glenn Hughes, a forestry expert with the Mississippi State University Extension Service, said many loggers face difficult decisions. A global economic slowdown, tight credit, and the housing bust are hitting sawmills hard and shutting down logging companies.

"Boy, surviving this downturn. I have talked to a lot of people who have been in the business for many, many, years — this is probably the roughest they have seen it," Hughes said.

In 2007, the Southern region of the United States saw a 30 percent decrease in lumber production, and that is mimicked in other parts of the country, said Peter J. Stewart, chief executive officer and founder of Forest2Market, a Charlotte, N.C.-based company that collects data on forest and wood products.

Over the last year, lumber prices have been "bumping up and down" on 30-year lows, he noted.

The brutal economics of the housing crisis don't appear to be letting up, continuing to drag down demand for both hardwood lumber, for floors and cabinets, and softwood, used in home frames.

The inventory of unsold homes stands at about 10 months, according to the latest National Association of Home Builders figures, including about 4.2 million existing and new homes.

A four-month supply of housing inventory is ideal for the lumber industry, said Forest2Market's Stewart.

Even if buyers miraculously returned to the market to purchase unsold homes, Al Schuler, a research economist with the USDA Forest Service, says it may be a little too late to lift up the lumber industry because the inventory of unsold homes is "a huge number."