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 THE REPORTS OF THE INDUSTRY  FROM THE ISLAND TO THE WORLD

 

Fast Breaking News

 
Mortgage Rate Highest in Nearly   Four Years

Nationally, Pace of New Home
Construction Cools Off

The pace of new-home construction continued its orderly cool-down in March, dipping 7.8 percent for the month following a temporary surge earlier this year caused in part by unseasonably pleasant winter weather across the nation.

Total housing starts dropped to a seasonally adjusted annual rate of 1.960 million units in March, according to figures released by the Commerce Department today. The rate of construction for the first quarter of 2006 was 2.131 million units, the strongest pace for any quarter of the current economic expansion.

Single-family housing starts were down 12.0 percent for the month to a pace of 1.591 million units. The first quarter average was an economic expansion high of 1.749 million units.

Builders are seeing a softening in demand because of rising interest rates, affordability issues and a reduced presence of investors/speculators in the housing market, according to the National Association of Home Builders

 

Complete stories on NEWS pages following plus the great HNH money savers for May.

 

SCREENED PORCHES
Solve Homeowner Needs and Enhance Surroundings

There is nothing like a screened porch for enjoying a bug-free summer evening or watching a rainstorm in dry comfort. A screened porch can solve homeowner needs and enhance their surroundings. Consider a four-windowed cupola on the porch roof. It will deliver plenty of natural light. Install screens only if the porch is for summer use. Use large sliding windows for a three-season porch. Stain the ceiling cedar and you give the room a feeling of extra warmth.

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Nationally, New Home Construction Cools
to More Sustainable Pace

(NAHB). Builders understand that the market is cooling off from the frenetic pace of the last several years and are adjusting accordingly, said NAHB officials.

The sizeable declines in housing starts for March partly reflected a return to more normal weather patterns, but it’s clear that builders are adjusting their production levels to the lower levels of demand evident in the market, officials continued. 

NAHB expects to see some further declines in starts as the year progresses, but anticipates an orderly transition to more sustainable levels rather than an abrupt housing contraction. Housing starts are expected to decline by about 6 percent for 2006 as a whole, mainly because of a reduced role for investors/speculators.
 
All four regions reported decreases in housing starts for the month. Construction of new homes and apartments was down 0.5 percent in the Northeast, 8.2 percent in the Midwest, 4.8 percent in the South and 15.5 percent in the West. 
Multifamily housing construction increased by 15.7 percent for the month to a seasonally adjusted pace of 369,000 units, and the average for the first quarter was a robust 382,000 units. 

Issuance of total building permits decreased 5.5 percent in March to a seasonably adjusted rate of 2.059 million units for the month. Single-family permit issuance was down 6.9 percent to a pace of 1.542 million units for the month. The pace of multifamily permit issuance decreased 0.1 percent to a pace of 517,000 units for the month.


 

Mortgage Rate Highest in Nearly Four Years

The nation’s benchmark mortgage rate has reached its highest point in almost four years.

The average 30-year, fixed-rate home loan is going for 6.49 percent, up from 6.43 percent and the highest level since mid-July of 2002, government-affiliated mortgage giant Freddie Mac reported in its April 14th survey.

“The threat of higher inflation, as we all know, invariably leads to higher mortgage rates,” said Frank Nothaft, Freddie Mac’s chief economist.
Some economists believe rates on 30-year mortgages could reach 7 percent by the end of this year.


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HINCKLEY’S HAS IT. . .HINCKLEY’S HAS IT. . .HINCKLEY’S HAS IT. . .HINCKLEY’S HAS IT. . .
 
SERVING MARTHA’S VINEYARD FOR 82 YEARS

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USE THE 1% SOLUTION TO INCREASE YOUR PROFIT MARGIN

Consistently Apply This Solution Over Time and Watch Your Bottom Line Climb

Could you  increase your gross profit margin from 24% to 28% in six months? We know one remodeling company that did.
He did it by using the “1% solution”: He made small but consistent changes in three important areas over time.
 
The chart below shows the effects of a 1% change in income, direct job costs, and overhead expenses. Notice that net profit differs dramatically based on where the change is applied. A 1% increase in income creates a 7% increase in net profit, while a 1% decrease in overhead only increases net profit by 1%. But applying that 1% across all three variables boosts the bottom line by 13%.

 
So where do you start? Increasing the contract price on future jobs by 1% should be a “no-brainer.” Decreasing job costs might be another matter. Look to greater control on materials purchases and charging for every change order. Manage labor productivity through the use of one-and two-week look-ahead schedules that are specific to each job and that define materials and subs needed to complete the planned work. Reducing overhead costs by 1% requires a focused look at current overhead expenses. Give your office manager the task of finding that 1% over the next month and updating the annual budget to reflect those changes. The lesson is clear: Apply the 1% solution consistently and watch the bottom line climb.

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SERVING MARTHA’S VINEYARD FOR 82 YEARS www.hinckleylumber.com
  www.hinckleylumber.com

SLOWER LUMBER MARKETS FORECAST IN 2006,
FOLLOWING RECORD DEMAND YEAR

The string of four consecutive years of record lumber demand should end in 2006, as the red-hot home construction market begins to cool, according to a new forecast released by Western Wood Products Association.

Preliminary estimates show lumber demand reached a record 63.9 billion board feet in 2005, rising 3.4 percent from the previous year. For 2006, WWPA forecasts lumber demand to slip a modest 2.1 percent to 62.6 billion board feet.

All of the decline in lumber demand will come in residential construction. WWPA predicts housing starts will total 1.93 million units in 2006, down 6.3 percent. Last year, a record 27.8 billion board feet of lumber was used in housing construction, or nearly 44 percent of total lumber demand.

Lumber use in the other markets — repair/remodeling, non-residential and industrial — is forecast to be slightly higher this year as the American economy continues to grow.

U.S. lumber production is expected to decline this year, slipping 2.5 percent. Production by Western mills should total 18.8 billion board feet, down from 19.3 billion board feet produced in 2005. Southern mills are expected to produce 18.5 billion board feet this year, down 2.4 percent.

Imports will likely gain market share in 2006. Canadian lumber shipments to the U.S. are forecast to decline, but only by 1.7 percent to 21.2 billion board feet. That volume would be the second highest on record.

European lumber shipments nearly doubled to 2.1 billion board feet in 2005. For 2006, lumber from Europe is forecast to rise to a record 2.3 billion board feet.

Shipments from American lumber mills to foreign destinations are expected to rise for the second year in a row. U.S. lumber exports rose 11.4 percent in 2005 to 897 million board feet. This year, export volumes should increase to 915 million board feet.

Final lumber industry statistics for 2005, including production by state in the West, will be released by WWPA later this year.
Western Wood Products Association represents lumber manufacturers in the 12 Western states and Alaska. Based in Portland, WWPA compiles lumber industry statistics and provides business information services to mills. The Association also delivers quality standards, technical and product support services to the industry.
 

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SERVING MARTHA’S VINEYARD FOR 82 YEARS

www.hinckleylumber.com

 

KNOW YOUR STUFF

Learn to manage your business instead of having the business manage you.

Few contractors are familiar with the financial workings of their own operations. Here’s why: most start out as installers, working for someone else. They don’t realize what it costs to run a business. And they’re not in the habit of writing things down.

 
That’s where getting control of your business actually starts. Writing things down (a business plan) is essential. It gives you and your business clarity and a road map showing where you want to go.

 
Critical Measure
Businesses are measured by sales growth and by consistent profitability. Here are some things you can do to keep business growing and profitable:

 
Set financial goals. Set sales and revenue targets at year’s end, laying out what you’d like your company to do in the coming year. Then compare sales and bottom line results with the month’s projected goal and with what you did last year. Each department —sales, production, and administration — also has its own goals.

 
Track leads daily. If your organization relies wholly or in part on leads, pay attention, daily, to the number of leads you’re getting. Compare them to your weekly, monthly, and yearly goals. If leads aren’t coming in, your sales are not going to be what they should be. You should also know what percentage of those leads you’re closing on, again, on a daily basis. Train yourself and your salespeople to sell your products, not give them away in the bid process.

 
Weekly sales reports. Every Friday, get a weekly report that tells you how you’re doing by salesperson and by lead, and the percentage of leads that are generated by advertising versus repeat, referral, or self-generated. Let’s say you get about 6,000 leads a year, and 53% are repeat, referral, or self-generated. These sales figures and closing ratios should be compared with figures for the previous year, as well as with monthly goals. A track record allows you to constantly upgrade and train your weaker salespeople.

 
Materials and labor costs. Unusual changes in materials costs can signal that something’s out of whack.Track materials costs, labor costs, and revenue (actual work installed). This will tell you whether or not you’re making enough gross profit. Know all of your costs so you can develop the right selling price based on your company’s costs, not the other guy’s price.
 
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Continued from previous page

Know Your Stuff - Learn to Manage Your Business

Monthly financial statements. It’s a must to have monthly financial statements in your hands as quickly as possible. Develop your skills to understand what the income and balance sheets are and what they tell you about your business ... monthly. Having a sharp accountant or bookkeeper is paramount to getting your numbers quickly and keeping you on a profitable path.

Pay yourself. A lot of contractors simply hope there’s some money left over in the bank when their materials, payroll, and overhead expenses have been paid for. Pay yourself a salary and include that as overhead.


 
Proof is in the Profit
Focus on the financial side of the business, and have a business plan, regularly updated, to chart your course. Most remodeling or replacement companies do not. Yet, if you wanted to borrow money, say for an expansion or some trucks, what do you think the banker would want to see first? Your business plan and your income statement and balance sheet.

 

WHO MAKES THE DECISIONS?

When It Comes to Home Improvement, There Is a Perception Gap

What do women and home improvement contractors have in common? They both agree the man of the house is not the primary decision maker when it comes to managing home improvement projects, at least according to a recently-released survey.
 
The online survey, conducted by ServiceMagic(TM), Inc., an online service that connects homeowners with prescreened and customer-rated home service professionals, asked 490 homeowners and 485 residential contractors who they believed was the primary decision maker for home improvement projects.
 
The survey found that only 8 percent of the female homeowners saw men as the primary decision maker, but 30 percent of the male homeowners noted themselves as the decision maker. In contrast, 25 percent of females cited women as the primary decision maker compared to 8 percent of men noting women as the primary decision maker. Sixty-five percent of the homeowners who responded say they make home improvement decisions as a team with their significant other.
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Continued from previous page

Who Wears the Pants When It Comes to Home Improvement?

Enter the third person in any home improvement project ... the contractor. When residential contractors responded to the same question, only 28 percent agreed that couples make decisions as a team. More than half (55 percent) of the contractors believe the female head of household is the primary decision maker, while only 17 percent cited men.


“This is a very telling survey. There is a gap between perception and reality within the household, and contractors are often caught in the middle. In matching our million plus homeowner members to our 40,000 prescreened businesses, we have a bird’s eye view into nearly 2 million projects a year,” said Rodney Rice, co-CEO of ServiceMagic. “More than 90 percent of all issues arise from a breakdown in communication and it is usually due to the triangle which forms when a contractor enters a household and a relationship of two becomes a relationship of three. Many contractors communicate to one spouse or the other, assuming the couple talks to each other and agree on projects.”

According to Tom Teehan, prescreened and customer-rated ServiceMagic member business, “I figured out a long time ago women ran the show in the household and the day I did, my business was better for it. I tell all my friends who are newer to the trade to try to communicate all important decisions to both spouses together at the same time whenever possible. Anything which impacts cost is a must. But when it is a design or functional decision, the old adage comes into play — if mama ain’t happy, nobody’s happy.”

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