INDUSTRY ASSISTS IN HURRICANE RELIEF; NAHB SHARES INITIAL IMPACT ON HOUSING

NEW ORLEANS, LA — In the devastating wake of Hurricane Katrina here, and now Rita in Houston , TX , numerous trade organizations have extended a helping hand to those affected both inside and outside the kitchen and bath industry.

“The National Association of Home Builders (NAHB) and its state and local associations are working as quickly as possible to get these builders back on their feet so they can begin rebuilding in their communities,” said David Wilson, president of the NAHB. He added that some 9,000 NAHB builder-members are currently displaced, or have lost their homes or businesses.

Similarly, the Bath & Kitchen Buying Group (BKBG) is heeding the call for some of it's own after the financial arm of the BKBG needed to be relocated due to severe flooding. It was which was located above Cameron Kitchen & Bath Designs in New Orleans .

Thompson Price, CKD, CBD, and v.p./membership for the BKBG, explained: “We got everything out that we needed, and relocated everything to Houston , where we set up housing and a six-month lease on an apartment [for BKBG CFO and Cameron Kitchen & Bath Designs' owner Jerry Johnson, as well as four other Cameron employees].”

Eddie Schukar, v.p./vendor relations and development for BKBG, added: “I don't think I've ever experienced a more profound outpouring of concern. Members and vendors of both buying groups have been incredibly concerned and gracious, from donating money or rooms, to the use of their cars and condominiums.”

He continued: “We've seen a level of concern and compassion that is a beautiful reflection on our industry as a whole.”

Additionally, BKBG has organized a relief fund for those affected by the natural disaster, Price further noted. “We have close to $30,000 in contributions that people have sent. That's going to help with housing for displaced people and any of our members or vendors who need assistance,” he stated.

Donations, made payable to BGS/Relief Fund, can be sent to the BKBG's office at 5322 West Bellfort, Suite 215 , Houston , TX 77035 .

In addition, for the next six months, through March 14, 2006, BKBG Vendor Craft-Art, a wood countertop supplier, said it will donate 5% of the list price for every top purchased by a BKBG member to the BKBG Katrina Disaster Relief Fund.

MORE HELPING HANDS

Numerous other industry groups are pledging assistance toward relief efforts. For example:

  • The National Kitchen & Bath Association (NKBA) has pledged a $25,000 donation to the American Red Cross to assist in the relief efforts in New Orleans and other Gulf state areas affected by Hurricane Katrina.

    “We're also asking our employees, as well as individual and member companies and their employees, to reach deep into their hearts and donate what they can in the face of this unprecedented natural disaster, as we come together as a nation with aid and prayer to help those in need,” said new NKBA CEO Michael Kelly.

    Kelly said the national office of the NKBA in Hackettstown , NJ is also in the process of formulating a “Member to Member Relief Effort” to directly assist members affected by the tragedy.

    “There are a lot of displaced members who will need assistance [and will need to] keep busy over the next four to six months,” Kelly observed. “Chapters and NKBA members in other states could offer work assignments to those left temporarily unemployed. Now is the time for our membership to pull together and show the real power of community.”

  • The Plumbing Manufacturers Institute (PMI) is participating in an industry coalition to assist in relief efforts in the wake of Hurricane Katrina, and in the event of future disasters.
  • Through the National Housing Endowment, NAHB has set up a fund for home builders' associations to offer aid to the victims of Hurricane Katrina in Florida , Louisiana , Alabama and Mississippi .

    “Our hearts go out to those affected by Hurricane Katrina, and NAHB is again poised to respond as an industry to contribute to the massive relief effort,” said NAHB President David Wilson. “We're both saddened and humbled by the enormity of this disaster and its toll on life, property and way of life for the residents of the hardest-hit areas.”

    Donations should be earmarked for the “Hurricane Katrina Relief Fund” and sent to: National Housing Endowment, Attn: Troy Patterson, 1201 15th Street, NW , Washington , DC 20005 . For additional information, call Kathy O'Kane, NAHB assistant staff v.p./leadership support and operations, at 800-368-5242 (ext. 8295).

  • The Reston , VA-based Kitchen Cabinet Manufacturers Association (KCMA) will be making a major donation to Habitat for Humanity from the revenues from its recent management conference, said KCMA president Dick Titus.

“We will certainly be there to assist and expedite things as constructively as possible,” Titus concluded.

IMPACT ON HOUSING

However, while the full extent of the impact of Hurricane Katrina – and Rita – on the housing market remains unclear, the NAHB has issued a preliminary assessment on the impact the catastrophe will have on construction activity, the supply and cost of building materials and construction labor, and the housing market, as a whole.

The number of homes destroyed by the Hurricane Katrina alone – an estimated 275,000 – is almost certain to dwarf the losses from any previous U.S. natural disaster, analysts at the Washington, DC-based NAHB said in September.

But, despite these preliminary numbers, BKBG's Price says that the impact on the industry may not be as significant.

“I'm not sure it is going to impact a lot of us, in terms [of our respective] businesses. Certainly the people impacted the most will be those in the Gulf states ,” he said. “However, time will tell. We may lose a couple of members who can't survive this, or who decide not to re-open.”

While the loss of tens of thousands of homes implies increased demand for, and construction of, new homes, past experience has shown that there is no massive surge in home building in areas impacted by natural disasters, an NAHB spokesman said.

“Replacing units destroyed by the storm will not begin for many months and will take place slowly, over a number of years,” an association spokesman observed.

Though rebuilding will start eventually, the immediate need is to clean up and repair damage to structures that are still viable, the NAHB noted. The association added that the repair process will absorb much of the construction labor near the affected area, as well as several key materials that would otherwise have been used to build new homes.

The materials that will be most affected, NAHB economists indicated, include roofing and wood panels (plywood and OSB). Demand for other materials, such as concrete, is likely to decline initially, as planned projects are cancelled or delayed during the initial recovery period.

The storm will impact the supply of materials, as well as demand, the trade association pointed out. The areas affected by the storm have a significant number of wood product facilities that may have been damaged or destroyed. On the other hand, trees that have been blown down will need to be harvested on an accelerated basis, perhaps helping to lower wood product prices in the medium term.

In addition, imports of building materials will be disrupted by the damage to port facilities. New Orleans was the top destination for imports of cement and a number of other building materials into the United States in 2004. Cement imports, in particular, involve the use of specialized terminal facilities. Congestion caused by diversion of shipping to other ports will also probably disrupt some supplies of materials, as will land transportation problems caused by damaged roads and rail and reload centers.

“This may have some negative impact because materials that we use, such as hinges and finishes, are shipped through New Orleans ,” KCMA's Titus noted. “I think we also all expect some price increases, especially [for] the materials and goods [that we use].”

“The industry will be affected in the same way as the economy, in terms of the impact on the cost of energy, or perhaps in the availability of certain products,” added BKBG's Schukar.

LOOKING BACK TO GO FORWARD

And, if history is any indicator, this may very well be true, NAHB economists noted.

For instance, from July 1992 to September 1992, the average price for plywood increased dramatically, as did the price of Southern pine framing lumber, largely as a consequence of Hurricane Andrew, NAHB economists observed.

However, the hurricanes in 2004 did not trigger a similar increase, and prices actually fell during the relevant period, after soaring during the preceding year.

Plus, the combination of greater (partly speculative) demand and disrupted supply produced a spike in lumber and panel prices in September, and with production already running at full capacity for wood panels, NAHB economists suspect that further increases for those products, as well as for roofing, are likely.

Moreover, the National Association of Realtors (NAR) is forecasting that Katrina, in particular, will not only drive up the cost of construction materials and labor, but will also boost demand for housing. This will, in turn, create an even tighter supply, which will contribute to a further price hikes.

As building activity picks up in the hurricane-affected areas, housing inventory will remain tight nationwide, meaning demand will continue to outstrip supply in most areas, reported David Lereah, NAR's chief economist.

Lastly, yet another result of Katrina, in particular, is that stubbornly low long-term mortgage rates will inch up even more slowly than previously predicted, due to “post-storm economic conditions to accommodate the losses of homes, jobs and businesses,” Lereah concluded.

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