MARKET INTELLIGENCE WEBINAR: OCTOBER, 2022

Abridged Webinar Transcript

Mike Farmer, President, Commercial Operations, BFS: Hello and welcome to our final webinar of our Market Intelligence series with zonda. As a reminder, this presentation contains no forward-looking statements. With that, I'd like to introduce Terry Schilmoeller, our VP of READY-FRAME® Solutions.

Terry Schilmoeller, VP, READY-FRAME® Solutions, BFS Thank you, Mike. At BFS, we used a builder's 2D plan and create a 3D image for review before the READY-FRAME® process is put into motion to precision-cut the READY-FRAME® components to within a 16th of an inch. We put the builders’ dollars that they have spent on architectural drawings back to work for them. This works for single family residential builds, it works for multi-family builds, light commercial (meaning hotels), it works very well, 55+ communities and most custom applications where the home design has been finalized. The benefits of this process, number one, would be less field framing labor involved, quicker and easier builds, increased product efficiency per hour of build time work, fewer errors and less risk, less ladder and saw time for a safer project and reduced job site waste.

So, in 2019, Builders First Source had a third-party independent study done where we calculated the benefits of READY-FRAME®. Some of the percentages that I can share with you today, would be the less field framing labor amounted to 33% fewer framers that were needed on a given job site to complete the project. Of those framers that were on that job site, their productivity per hour was increased by 39% per worker. Their ladder time and saw time was decreased by 27% on the job, and the reduced job site waste amounted to 66% fewer dumpsters that were hauled on a given job.

So, this map is going to show you the different locations where READY-FRAME® is located today across the country. We're located in 36 locations in 19 states, with new locations coming in 2023. We'll be working towards Florida and Arizona in order to accomplish our READY-FRAME® footprint across the United States.

Mike Farmer, President, Commercial Operations, BFS: With that, I'd like to introduce Ali Wolf, the Chief Economist from Zonda.

Ali Wolf, Chief Economist, Zonda: Thank you, Mike. If you're not familiar with Zonda, we are a housing data and consultancy firm. We track the entire building life cycle. We're looking at what's happening with raw land, and as land goes through development. Know that I'm not going to show that many land stats today because our data comes out quarterly. The new data will be released at the end of this month, so we will have new stats coming out soon.

But then we track all of the actively selling communities across the country, which is where you're going to see more of my focus today. What's happening with the actively selling communities on the ground, what's happening with pricing, and ultimately what's happening with inventory today; not the land side, but the broader inventory discussion.

So, starting with that backdrop — we really have a lot of the similarities seen across the country. I think one of the biggest things is just preserving backlog, to just make sure that people that were excited to purchase a home over the past nine to twelve months are still very excited to go through with purchasing their home.

We have found that incentives are extremely common right now, both from a backlog perspective, especially if someone had committed to buy a home and they didn't have a rate lock. So, we're seeing some of those mortgage rate buy-downs really effective in the preserving backlog discussion. And then also just figuring out what makes the most sense to encourage additional sales. What we're finding is that the builders that give their sales teams the most flexibility to say, “Well, who is buying? Why are they shopping? What's the biggest pain point?” Those are the incentives that are most effective. It's not a broad brush. It really depends on the person. I think the best thing that we're seeing on the resale side is we were at this point where resale sellers thought that they could get any price for their home no matter what, and I think we started to realize that that's not the case. You can't continue to sell for 15% more than your neighbor. And so, there is some realization that's coming from the resale sellers, which I think is good, when you try to talk about some kind of return to normalcy in the market.

But the backdrop is similar to what I talked about last time; the fact that when you're in a market that mortgage rates are rising very quickly, it's no surprise that our industry is one of those that is going to slow the most. So, we saw that mortgage rates move from 3% to now over 7%, just throughout this year. So, I guess in 10 months. And as we look at this, the resulting impact is that a lot of that froth, a lot of the unhealthy parts of the housing market that I think we all understood weren't going to continue forever, have come out. And existing home sales, now 90% of the market, are back to where they were or just below where they were in 2019. Very similar when you look at our data at Zonda for the pending sales index; this is us tracking contract sales activity, and again, we're just below 2019 for the overall national level.

As we look at that data, know that right now the publicly available data is for August. Many of you know that we also do division president surveys to try to get more real time stats. What I'm showing you here are the results from our September survey, and as you can imagine, we are seeing that the majority of builders are saying that demand is slower. In some cases, again, it's slower, but it feels very seasonal, and you'll see how that looks by market. And in some cases it says, you know, the builders are saying, “Yeah, it does feel slower. It feels slower than normal seasonal levels as well.” We have about 20% of builders that are still saying that demand is on track with what they expected or stronger.

Now, like I showed for the last slide, we talked about what we were seeing with overall sales from August from new and existing. As you look at September, we have 15% of builders that said their sales had actually increased month over month. 34% said their sales were flat, and then we had about 50% that said sales activity had slowed even more from those August levels into September. But this becomes, and this is where we start to talk about the differences by market and by priced here, it becomes a very unique story.

So, any of the markets to the left of the dotted line are underperforming 2019, any to the right are outperforming. So, on the right, you're seeing that markets across the Midwest and the Southeast are outperforming. There are some markets where it's just difficult to get more homes built, like places in Philadelphia or LA where you're seeing that outperformance compared to 2019.

On the left-hand side — Phoenix, Sacramento, Las Vegas, Denver, Riverside, Seattle, Austin — these are markets that over the past couple of years when you showed, where do we see some of the highest levels of home price appreciation, and where did you see some of the most positive domestic and migration, those markets fell to the top. They saw a lot of reasons why home prices went up. A lot of new buyers’ inventory went down, but when those prices went up so far away from income levels and with interest rates over 7%, we're finding those are some of the markets that have retracted quicker than others as well.

So, hesitancy from buyers that will range from some people just saying, “You know what? I'm not sure where this market's going to go, so I'm going to maybe just sit on the side.” Which to me is a really good opportunity that we'll talk about a little bit later. We also have some buyers that are saying, “You know what? Every time I open the news, all I read about is the impending recession, so maybe I want to wait.” But in some cases people are just saying, “I would still love to own a home.” As I showed last time we met, we have a record number of buyers that still are interested in buying. They're just trying to figure out how to navigate this environment.

If you look at resale home prices, these numbers to me are amazing. This is looking at since February of 2020, what has happened to resale price appreciation per month. So, I think we all understand that wages have gone up, but if you subtracted out wages from inflation, we know that wages have actually gone negative. At the same time that across a lot of these markets, home prices were up between 5,000 and $8,000 every single month. And if you look at the math, moving from a 3% interest rate to a 7% interest rate is the same as $800 more per month for that average monthly payment.

And when I look at these stats, we do know that there are still homes being sold across the country. And so, what this tells me is when we're looking at prices that have gone up this much, and when we look at the monthly payment that has risen so quickly, the big question is what is available on the market that makes people want to move?

I think the big part of today's presentation is the “why.” We're finding some builders are choosing to down-spec their homes because they're saying, “Hey, we know that the monthly payment's important. We're trying to keep the average sales price reasonable, so we're going to take out some of the bells and whistles in the home to help address the affordability concern.”

We have other builders that are saying the complete opposite. They're saying, “Well, our competitors are really down-speccing the homes, but ultimately, if consumers are going to pay, they want to know that what they're buying is worth the money.” So we're having some builders that are doing the complete opposite and saying that they're up-speccing the homes; they're trying to make the homes as aspirational as possible. So, if someone's coming and shopping, they're saying, “Wow, there's a reason that I want to go through with this purchase.”

Now, as we talked about last time, we know that what is happening to consumers based on mortgage rates depends on the consumer, because if you're a cash buyer, you don't care that mortgage rates went from 3 to 7%. If you're a buyer that is buying a home based on your income, you don't have much else wealth to tap. Those buyers are the ones that are showing the most sensitivity to today's market. As we look at the lower third, right now we have 23% of the top markets that have a sales rate performing above where it was last year. As you look down this list, there's a couple markets that probably stand out to you — actually, four that really catch my eye. Las Vegas, Phoenix, Seattle, Sacramento. Those are some of the markets again, where you saw some of the most massive run-ups. But what happened was that lower third, that price point of the lower third, and some markets used to be 300, now it's 500. So, to go from that kind of gap, you have seen that some of those consumers respond accordingly.

Not entirely the case. When you look across the middle third and the upper third, these are some of the buyers that have more wealth to consider. And yes, there have been fluctuations in the stock market and not everyone is willing to tap their stock holdings, but we have seen that there's still some outperformance compared to where we were in 2019. Just take a look at that bottom chart. That's your upper third. This is, if you're looking at what we call the high-end market in Tampa, in Las Vegas and Raleigh and Jacksonville and Charlotte and LA. I can read down this list, Chicago, Salt Lake City, Seattle. You're seeing that there still is that outperformance, and that's why when we're looking at today's market, I said, we can look at markets, but we also need to dig into that and look at what kind of buyer groups are buying and what's their motivation behind their purchase.

Which is where I want to take the discussion over to the regional highlights. So, when you look across the Pacific region (LA, Portland, San Diego), still above where they were in 2019. Riverside, and Sacramento down, San Francisco, Seattle, down.

As you look at somewhere like Riverside and Sacramento, these were the affordability place. These were when the pandemic hit, and you could move a little bit inland. There were, you could work from home. There were a lot of opportunities. Bang-for-buck was there. Made a lot of sense that those markets did really well. But then the spread, the value proposition has gone down as some people have returned to work, and just as those prices have gone up really, really fast. So that's part of the reason we're seeing some of those markets slow, that links up with places like Vegas, Phoenix, Salt Lake City, Denver, Boise, some of those other markets fall into that same category.

Now what we like to look at is quick move-in (QMI), and as we're looking at that, in a place like Sacramento, that's up 44% compared to 2019. That is showing us that there's actually a buildup of inventory in that market, Riverside, about flat. As we go throughout these markets know that we look at that QMI very closely, and you'll hear me mention this more than once. The existence of a lot of QMI will contribute to more dramatic price drops in a more dramatic use of incentives.

Markets where you don't see as many QMIs, you'll probably still see some incentives and still see some price drops, but nowhere near to the same extent. Take a look at San Francisco and Seattle. Again, we're talking sales rate down. You're looking at the QMI. Still very notably compared to 2019. Now again, you layer in QMI to total units under construction going down for Riverside and Sacramento, you're seeing total units under construction up between 60 and over 100%. If you look at San Francisco, Seattle, maybe we're going to throw in LA — look at that change. You basically have total units under construction down or flat. And to me, those become interesting because San Francisco's number of total units under construction is so minuscule compared to the overall level of the market.

Now, San Francisco does have their overall resale inventory flat to where it was last year, but you're not having that same buildup of QMI. Most of these markets still have resale inventory down compared to 2019 that matches the national level. That's not the same everywhere in the country. And you'll see some of the markets that stand out against this.

In places like the Pacific region, you have some consumers that are unwilling to sell their home because they don't want to reset their property tax, and you have the same issue that you'll see across the country, which is the lock-in effect. “Why do I want to sell my home and reenter the market with a higher interest rate?”

Then you move to the Rocky Mountain region, and again, starting at that top line, you have the sales rate change down year over year. All of us would expect that change from 2019. These are pretty big numbers, so we are seeing some of these markets are slowing. For context, if you're operating in Boise, Boise is following the same patterns of the market we're showing here. Now in markets like this, we're seeing that the percent of projects with incentives is very high. This is higher than the national average, which is averaging a little over 50%. You can see in Denver, it's somewhere like 97%. When you look at QMIs, you are seeing that, Salt Lake City, 231% change increase compared to where we were in 2019. Denver's actually a little bit down compared to where it was. We have a lot of units under construction, most notably in Vegas and Salt Lake City. And then again, take a look at that resale inventory; still down in Denver, which is good. When you're looking at Las Vegas, you're actually up 12% in terms of resale inventory. Salt Lake City, down 7%, but we're watching for that to change because you have inventory that's pretty close to 2019 with a large number of units under construction and a pretty massive existence of QMIs right now.

When you look at the Southwest — and I promise this is the last one where you're not going to feel that good as I go through it until we switch over to the other regions. Again, top line sales rate year over year, all of them down compared to 2019. Houston is outperforming. You can see Phoenix and Austin are the two markets that have the biggest drop compared to where they were in 2019, and also a lot of units under construction with an existence of QMI that's now above 2019.

When you look at resale inventory here, to me, we're looking at Austin and Phoenix and Las Vegas as some of those where you are finding that resale inventory is above 2019. Again, not the same as the national trend, but it becomes local. Take a look at Dallas, Houston, San Antonio. You're still seeing resale inventory extremely constrained.

All right , let's move over to the Midwest, and as we look here, many of you know I was born and raised in Cleveland, so it's fun for me to talk about the Midwest. But you can see for that top line, it's not across the board that every market is even down year over year. When you look at where we were compared to 2019, you actually have the majority of the top markets that are outperforming 2019. [In] Cincinnati and Columbus, you're seeing that those levels are down. Now, Cincinnati and Columbus also have QMI that's up compared to 2019. Same thing with Minneapolis. And as you look at somewhere like Columbus, I toured this market a few weeks ago, and I remember standing at one new home community and looking out the window and the sales agent could literally point to the QMIs that were in the community that he knew he needed to sell quickly.

So, as we're looking at this, I think the biggest concern for builders right now in the Midwest in some markets of the Midwest is just, “Hey, let's just make sure that we can move this standing inventory relatively quickly.” Resale inventory, though — look at those stats, still massively down. And one of the things that I heard talking to a builder in a different market in the Midwest is they said that what they're finding is it's this interesting dynamic where they were not immediately a winner of the pandemic from a relocation point of view, it was that more people were just looking to buy a home. It wasn't that everyone was coming in from out of market. What I'm now hearing is as some parts of the southeast become expensive relative to what they used to be, there's actually some migration from the Southeast to the Midwest because the Midwest still does have that bang-for-buck going for it despite some of the changes that we've seen in home prices recently.

So here we go to the Southeast then. So, top line, you can see across the board almost all of the markets down year over year. Second line, change from 2019 — almost all of the markets up. So again, you can start to see that clear regional difference as we look here: QMI, down, down, down, down, down with the exception of pretty notable changes in Jacksonville and Louisville. Jacksonville as we're looking at this, we're also looking at those total units under construction. So on a relative basis, just a little bit more developable land. But as we're looking at this, again, take a look at the resale inventory: still very, very low on that bottom line. And our expert, Andrew Wilson, is talking about how there's migration, lifestyle changes, diversified employment opportunities that are helping support some of the growth in the Southeast.

And in the Northeast, what you can see is a couple of the main markets — New York, Washington DC, Philadelphia — looking down here, DC stands out for being the slowest from a sales rate point of view. Holding up relatively well with that sales rate for New York and Philadelphia. QMI between flat to down, total units under construction, not a massive number. And I think that's really one of the biggest takeaways of the Northeast, is because there is not that much developable land, because it is more land bound, they're older cities, they have older homes, there's not that many units under construction. It's what we call, frankly, a bit more of a boring market. It's not as boomy and busty as some other markets as you would see and you have a lot of constraints on that resale inventory where existing homeowners are just not that willing to put their home on the market.

But the question is, since the market has slowed, how are builders responding knowing that our business is to build homes and sell homes? And one of the big things that we're seeing is those use of incentives are still extremely common across the board, whether it's the rate buy down (either the adjustable version or the 30-year fixed version), money towards closing costs that become important to consumers as they're trying to watch their cash to close and how much of a down payment they can do and how that plays into the monthly payment. And then we're seeing money towards the options and upgrades.

When you look at pricing. So for context, if you guys remember at the beginning of this year when we did this presentation together with BFS, we knew that 97% of builders were raising prices, and now we're at a point that about 5% of builders are raising prices, 64% are holding prices flat. So they are where they are, and maybe they're going to do a little bit of incentive, but not going to move that dramatically. As of September, we had 28% of builders that had lower base prices. Again, our data for September shows it's now 38%. So you are seeing lowering base prices become more common, and it's usually because one builder in the market within maybe your competitive landscape, has cut prices and then it kind of forces the hand of some of the other builders within the area.

So, national quick move in data. We collect this every week. You can see that we're now above 2019, 2020. We haven't been above recently, but we just crossed over. But as we look at this, know that that's not a dramatically high number. That national number does not keep me up at night. That feels very much in check, very much in line with what seems to be a more normal and healthy market. Again, as we're looking at the QMIs, we're really looking at the extent to which it built up quickly, and the extent to which it looks out of line with what a more normal market might look like.

So, as we look at all of this, we talked about QMI, we talked about listings, but we also want to talk about what is coming down the pipeline. What do we know is likely going to happen with starts, and what are we seeing with total units under construction? And the first thing that we should acknowledge, and the first thing that we know is that historically when sales slow, starts slow. It makes total sense. We see that going back to the 1970s, you have a three-to-six-month, really three-to-seven-month lag from when the market slows to where you see starts slow. That's, I think a given, and we're already seeing that on the ground.

So we saw today we got the new single family units coming out. You can see that we're off the high levels that we were at over the past couple of years. Putting it back to context, that to me is always so important. Year-over-year changes will be one number, looking at where we were from a historical point of view becomes important. Put you back to 2019. Now as we look at this though, like I said, I think context becomes really important. This is looking at those starts going back to the year 2000 and what gives me a lot of comfort is if you think about last cycle, and you think about for how long we had so many units that were under construction — this was year after year after year — we had a really accelerated cycle this time around. We had the total units that were being built only lasted at a high level for two years, but you can see even that high level looks minuscule compared to what we saw last cycle. As we're seeing the adjustment, I also think when your mind goes back to “okay, the market feels slow,” you need to remember to put these in context of what it was like last cycle. How many units, how long, versus what we've seen this year or the past couple of years.

Now as we're looking at the starts, the starts are different than the number of units that are under construction. This number is near a record high, but remembering why is important as well. It's largely because of those longer cycle times that are still impacting the market, though not as discussed as commonly as they once were. We know that builders were rushing to try to meet demand, and we know that that resulted in a large number of units that are still under construction, right now. So going back to preserving backlog, which I think is kind of a third theme of today's presentation, we know that there are a lot of units where they're probably your consumers tied to these homes, and if not, they're homes that ultimately turn into that QMI.

When we look at government services, we have 62% of builders that are still saying that's a massive issue. 56% are saying land disruptions, 58% saying labor. Now, I think this is a really interesting number because as we looked back over this year, we got to a record high of 80% of builders that were saying they were having a massive labor shortage, and it was causing a big issue. So, we went from 80% to 60%. 60% is still extremely high, extremely elevated, but what we're hearing on the ground is some builders are saying, “Because we're not starting as many homes, we're not having as severe of a labor shortage as we did have.” It's still there, still absolutely an issue. It just seems like it's getting a little bit better, and I would say the same thing for the supply disruptions. We had month after month after month of over 90% of builders saying that supply disruptions were just causing an absolute headache. We still know on the ground it's whack-a-mole. We still know that it's not easy to do business. We still know that supply disruptions are there. I think the good news is, at least directionally, we're not talking 95% of builders anymore, we're talking 72%.

As we look at this, the components that go into a home that are shifting and causing the biggest headaches are different than what they were. I think at the beginning of the pandemic, it was some of those early components to getting the homes built. What we're looking at today is some of those last-touch items, which they have been pretty similar over the past handful of months, where it's HVAC equipment, windows and doors, appliances, and cabinets. These are some of the components that builders are saying are impacting their cycle times the most severely.

And as we look at this and as we say, okay, we went from 95% of builders saying supply chain issues to 72%, and wow, it seems like some of the components are getting maybe a little bit easier to source — I think there's a little bit of a misunderstanding about some of the trends that are happening from a construction material point of view, because it's a very similar trend where at the beginning of this year, there was the producer price index, the PPI for construction materials (this is a measure of construction costs), it was up 35% compared to where it was last year. Where we're looking at today, we're saying that it's up 9%. So yes, the rate of growth in construction materials has come down. When you're looking at that though, know that that 9% is off a higher base level, so we're still seeing that construction materials are a massive part of the equation of trying to figure out what can happen with home prices and how the market moves forward.

So, looking at all of this and rolling it together, we started this section by saying that when sales slow, you expect to see starts slow, and we're already seeing that on the ground, and then we're layering into what that might look like for the rest of this year and going into next year. As we go into next year, you see a similar thing: not as many builders reporting significantly slowing starts, but still, you have about 50% that are saying “slightly slowing” and 34% saying “significantly slowing,” and 20% that are saying “not planning to slow starts at all.” And that could be regional, that could be them trying to gain market share, that could be them trying to position for when the market does come out on the other side. But we're tracking, obviously, what happens with the starts activity as we go into next year.

So, final thoughts. When you look at the BTR market, this is one thing that builders are considering a lot, meaning either builders are strategically shifting to build-to-rent, or with some of that standing inventory trying to sell that off to some investors.

We know that the why becomes important. I talked about the lock-in effect. We know that the lock-in effect is really a hindrance to some consumers. If we have 90% of people that have a mortgage rate under 5%, why do they want to move? Well, the answer is sometimes, like I said, some people don't care about interest rates. Sometimes you have to — whether it's divorce, whether it's marriage, whether it's having kids — moving from one market to another, there are still “whys.” And it's figuring out how to be well-positioned in the event of that move that helps us be successful. And ultimately, we know, and I think last time we talked about the shift from taking orders to selling.

When you think about that, you go back to the consumer research. If you're going to change your product, if you're going to do more attached, or smaller square footage, or larger square footage, or down-spec or up-spec, where should you be spending your time? Where should you be spending your money? Going back to the 101’s of building homes and thinking about and focusing on that consumer research has become, I would say, more important than ever as we look at today's market.

So with that, I will stop sharing. And Mike, let me pass it back to you.

Mike Farmer, President, Commercial Operations, BFS: Ali, thank you so much. That was a lot of really good information and we appreciate you working through that for us. I want to introduce Steve Lavalley, who's our VP of forest products and transportation.

Steve Lavalley, VP, Forest Products & Transportation, BFS: Thanks, Mike. I just want to take a minute to kind of reflect back on some of the comments that Terry made earlier regarding READY-FRAME®. Specific to the commodity lumber, I can say that these benefits also extend directly to the efficiency and utilization of raw resources, you know, lumber and all the forest products as a whole. I can tell you our READY-FRAME® locations are highly efficient and responsible consumers of lumber and can often better utilize the products and tally profiles that the mills produce. And so, I can say that our optimizers do reduce waste, and we definitely see this on the procurement side of the business as well. Hopefully the builder can see this translate to less waste and scrap on the job site.

Technologies like the READY-FRAME®, panelization, and ready-made trusses are a highly efficient use of the natural resources. Speaking of the lumber and the structural panels, though, certainly the markets have felt the impact of headwinds in housing and construction. Prices are well off their peaks that we saw earlier this year and last year. This slowing demand causes an apparent shift in the supply and demand balance. But let's talk through what this really is. So, OSB and lumber appears more abundant, but only relative to current demand. Transportation appears more abundant, but only relative to current demand. Similar to some of Ali's comments there, in fact, the actual supply of both is really no different than what it was last year or even earlier this year.

When we find housing starts begin to rebound, eventually at some point, this nerve from the last two years could very well rear its head once again. So, this is where efficient use of the product should be important to all of us. And I think we're ready for some of these, panelization wall panels, for roof trusses come back into play.

So, for me, a lot of the questions for me often come about regarding price. And so yes, commodity prices are lower today, but where will they go next? I try not to predict future prices necessarily, but I think we can say that the cost structure for everybody in the industry is higher than it was just a couple years ago.

Inflation of fuel, inflation of energy, inflation of labor and logs, rail, all sorts of other fixed and bearable expense. So, I think it's reasonable to expect that the floor price at which the producers begin the curtail production will be higher than what we were used to back in even 2019 or before. So be cautious with any expectation of prices following much lower in 2023 than we're looking at today. There’s my price prediction.

Which makes me think about, I saw this, just yesterday. I was looking at some of the FEA information that they provide as a good illustration of this exact point. We can see where the recent market levels on the bottom right reached what, let's say the cost of production could be. Hopefully all of this can give everybody a reminder that slower markets don't always mean lower prices. Yes, we have lower prices today than we had over the last year or two, but as price of lumber and cheap goods approaches the cost of production, we could very well start to see curtailments in the industry.

And so, if there is any uptick in the near term of housing and demand, we could quickly find ourself back in a similar scenario that we just saw the last year or two. So don't get too complacent on your pricing forecasts. You get the trading prices that quickly approach costs production of these products.

On that note, I'll turn it over to Jeff. Take it away.

Jeff Rettig, VP, Supply Chain, BFS: Thanks Steve. I'll cover some of our building products real quick. Availability is steadily improving in some of the building products. Both James Hardie and LP® SmartSide® have additional production coming online, and availability will continue to improve over the next two quarters. As Ali referenced, with the slower housing starts back to 2019 levels, we are seeing the availability of I-joists. We've already come back in line with traditional lead times and we expect to see LVL lead times come back in line with historical expectations over the next few quarters. BFS continues to add production capacity across the nation for our truss plants and lead times for both roof and open web floor trusses continue to come down. As Terry mentioned already, we continue to add READY-FRAME® sites and capacity across the nation.

As we turn to millwork — vinyl window suppliers are in a much better spot than they were earlier this year. Factory capacity has been added and labor has been steady. This has allowed the backlog for many suppliers to be worked down to under nine weeks, and in some cases even four to five weeks.

Wood window suppliers have also seen some improvements. Mostly times are better, but still extended above normal historical levels. Wood window capacity has not been as flexible as vinyl suppliers that consequently are taking a longer time to recover. The big challenge for the wood window industry as well as all windows continues to be glass. Other materials and components have stabilized, but glass is in tight demand. Notably large glass for direct sets and patio doors. This is due to a shortage in the US float glass capacity and competing industries like solar panels taking additional allocation. BFS highly recommends planning and confirming lead times before starting any new projects.

Lastly, we continue to see increased production around interior and exterior doors, with lead times and fill rates both improving. As we have mentioned before, please continue to work with your BFS sales professionals in helping plan your projects to ensure a consistent product flow.