Reducing costs has become the mantra of home builders across
the country as they struggle in the face of a major industry
downturn in recessionary-like economic conditions.
Recent financial results of some of the country's big home
builders make grim reading as losses continue to pile up, and
most forecast the malaise will drag on well into next year.
Beazer Homes USA Inc., Atlanta, posted a net loss of $109.8
million in its fiscal third quarter ended June 30, a slight
improvement from the $118.7 million net loss logged in the same
period last year, as revenue slumped 39.5 percent to $455.6
million from $753.5 million. However, for the fiscal nine-month
period the company's net loss surged to nearly $478 million
from $255.8 million a year earlier on revenue that tanked 42.6
percent to $1.36 billion from $2.37 billion.
The industry stands to remain challenged for the remainder
of the year and into 2009, Ian J. McCarthy, Beazer's president
and chief executive officer, said in a statement. "As such, we
maintain a disciplined and cautious operating approach and our
principal operating goals during this downturn continue to
include generating liquidity, reducing overhead and direct
costs, limiting investment in land and homes and reducing
unsold home inventories."
As home builders continue to cut costs, the ripple effects
are spreading across the supply chain.
With costs at the forefront of the industry, home builders
appear unlikely to boost the use of metal framing despite some
of the benefits offered over its wooden rival.
"It's like me going to buy a Hummer for a new car right now.
It's just not in tune with the market," said a spokesman for
Toll Integrated Systems, a wholly owned component manufacturing
unit of Horsham, Pa.-based builder Toll Brothers Inc. "I don't
see how it would justify itself, unless in a strength
application. But we're dealing with townhouses three to four
Toll Brothers has plants in Knox, Ind., Morrisville, Pa.,
and Emporia, Va., manufacturing a variety of products using
primarily wood, including wall panels and trusses, millwork and
other house components.
Compounding the problem of the extra cost associated with
using steel is the issue of retooling existing equipment and
investing in new machinery, the Toll Brothers spokesman said.
"Any switch would be a major machine changeover and retooling
because we automatically nail and fasten our stuff together,
with the exception of our trusses," he said. "This would be
added costs on top of the rise in steel prices. I don't know
what the advantage would be for cost. Maybe assembly might be
faster and stronger. But I don't see the value in it at this
Firming overseas demand for steel produced in the United
States due to the weakness of the dollar is doing little to
encourage home builders to switch to steel frames, he added.
"Our steel is going overseas. But with lumber we're getting it
from America or Canada. It's plentiful and we're energy
independent. It just makes sense to stick with lumber, and it's
even more important now with the market the way it is. In this
environment, every dollar has got a name."
While cost is a key driver to wood's dominant position in
the market, one of the biggest hurdles continues to be
education and the industry's comfort in using wood.
"The big pros to steel framing used in residential
construction are its dimensional stability-it won't warp or
change size over time the way wood will. It also has a recycled
content-all of the steel used in cold-formed steel framing
contains at least 25-percent recycled steel," said a spokesman
for the National Association of Home Builders (NAHB) Research
Center. "But a big plus for wood frame construction is the
large number of people who are familiar with and know how to
build with wood. Wood is also very good from a thermal energy
However, he added that wood does face integrity issues in
certain applications. "Some of the cons are that the standard
sizes of wood framing are sometimes limiting when one has a
unique building situation, such as an unusually large span in a
great room. It is also combustible and susceptible to rot, mold
and changes in size and shape over time," the spokesman