President of Commercial Operations, Builders FirstSource
Single-family home construction has bottomed in current macro environment: Builders FirstSource CEO
Builders FirstSource CEO Dave Rush joins 'Squawk on the Street' to discuss what Rush anticipates for housing demand, what ...
About Johnny Cope
In a September 2023 interview, Builders FirstSource CEO Dave Rush stated that single-family home construction has "bottomed" in the current macro environment. He expressed optimism that full-year single-family activity would be down "single digits" compared to 2022, which he described as better than the company had expected. Rush attributed this outlook to builder strategies such as buying down mortgage rates and offering smaller homes, which he said have helped sustain demand. Rush noted that labor remains a challenge for both builders and his company. He said Builders FirstSource has invested over $100 million since 2021 in manufacturing operations to increase output per labor hour. He also stated that the company is focused on customer service and on-time delivery to help address affordability, and that its value-added prefabricated products are intended to reduce construction time and labor costs.
Transcript (6 segments)
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Interviewer0:00
Mortgage demand from home buyers dropping for the third straight week as interest rates rise despite inflation rate concerns. Supply and demand metrics weigh heavier in pricing. Dave, it's good to have you here. You wouldn't know it from the way your stock is performing, but you have been navigating a bit of a down period in industry activity, revenue declining, things like that. But what are you modeling and anticipating in terms of housing demand from here on out, both single family and multifamily?
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Johnny Cope0:35
Thanks for having me on the show. We've heard from our builder customers through their reported earnings that housing demand has been greater than anticipated, and revenues and margins have been greater than anticipated. So we're cautiously optimistic that the demand profile is going to continue through 2023, and, in fact, most of these customers are forecasting improving demand throughout the year. Our home builder customers have done a great job of buying down rates, offering options that include less square footage, fewer options for the home, ways to afford that or ways to solve for their affordability challenge. And, of course, we get the benefit of those successful transactions through additional building material sales. We're very optimistic single family home construction has bottomed if you look at the current macro environment. If things change with the macro environment you have to reevaluate. Given the current macro environment and the ways that have proven to be successful for our customers to move homes, we're optimistic that the full-year single family will be down single digits to 2022, but much better than we expected coming into the year. It also underscores our belief that fundamentally housing has been under built and there's still a demand presence out there that is going to carry us through.
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Interviewer2:10
Yeah. It does seem as if clearly with a tight housing market, very little supply, the new home construction has an advantage. They can buy down the mortgage rates as you say, they can kind of modify pricing. What does that mean for you if, in fact, they're trying to make these homes more affordable and trying to obviously save where they can? Does that mean pricing pressure for you?
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Johnny Cope2:33
I think it might affect our top line a little bit. Obviously, less fiber in the home, but we still prefer that alternative than the home not sell at all. In addition, our value-added products, they helped control the costs of the build. Those prefabricated components come to the job site ready to install. It saves time and labor costs and makes the construction process more efficient. Cycle times for builders have been reported to continue to come down post-COVID. We're doing our part on helping that as well. We are relentless on our customer service, on-time in full metrics and trying to make sure we have the materials there at the right time. So we're doing what we can to continue to solve the affordability challenge in this current environment, and we believe that we have a good plan in this current environment to keep demand going throughout the year.
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Interviewer3:33
It almost seems like some of the premade products are addressing the labor challenges. What are you seeing in terms of the labor challenges and how are you investing in automation to help address that?
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Johnny Cope3:45
Yeah, that's a great question. Labor is still a challenge for our customers, especially skilled labor, and for ourselves. We have invested heavily in our manufacturing operations, over $100 million since 2021, designed to increase the throughput of our operations per labor hour. So that has been a focus for us, again, on growing that value-added segment.