Few trees fall in forest

The sound they make is the noise of a suffering lumber industry

JACKSON, Miss. — The glut of homes in foreclosure, vacant, or stuck on the market has the nation's lumber industry hanging on by 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 are faced with 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 U.S. 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-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 Commerce Department last week reported that groundbreaking for new homes in September was the second worst monthly total since 1959. It was January 1991 when the country, in a recession, saw lower housing starts.

Construction of new homes and apartments dropped by 6.3 percent last month, pushing the total production to a seasonally adjusted annual rate of 817,000 units.

Owners of existing homes, meanwhile, are struggling just to keep their property as housing values drop, unemployment rises, and financing options disappear.

The number of homeowners caught in the foreclosure crisis grew by more than 70 percent in the third quarter of this year compared with the same period in 2007, according to data released Thursday. Nationwide, nearly 766,000 homes received at least one foreclosure-related notice from July through September, up 71 percent from a year earlier, said foreclosure listing service RealtyTrac Inc.

And by the end of the year, RealtyTrac expects more than a million bank-owned properties to be on the market, representing around a third of all properties for sale in the U.S.

Even if home 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."

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

There is one bright spot, the falling housing starts could eventually reduce the glut of unsold homes.

But even if housing starts begin creeping back up, 2009 will be even tougher for the industry as people scale back building plans, according to George Barrett, editor of the Hardwood Review magazine, who has been tracking the lumber industry for several decades.

"We are going to be building smaller houses. We are going to see a lot more 2,000 square-foot homes rather than 5,000 square foot," he said.

Meanwhile, during the past decade, furniture makers have closed or cut jobs because of competition from foreign markets, and Schuler says many hardwood lumber producers switched to producing flooring, cabinets and molding for residential structures.

"This is all tied to housing more directly than furniture," Schuler said. "So that market is not going to turn around either until housing turns around."

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