Area lumber companies pinched by housing downturn

An auction sign graces the once vibrant Edward Hines Lumber Co. lumberyard in Mount Prospect after more than 50 years of supplying local homes.

The nation's second largest lumberyard chain, Stock Building Supply, laid off 5,000 workers in the last year. Stock Building bought longtime Elgin-based lumber company Seigle's Inc. in 2005.

Local lumberyards report the 52 percent downturn in suburban Chicago new home sales is clamping down on them and forcing layoffs. And they are struggling as they face rising health and facilities insurance, slowing home starts and falling lumber prices.

"I've been in this business all my life and this is the worst slowdown I've ever seen," said Gerald Wille, president of Edward Hines Lumber, based in Buffalo Grove.

Real estate analysts say the worst may still be ahead for lumberyard companies.

"The effect on the lumber industry may be exacerbated more than 52 percent," said Tracy Cross, owner of Tracy Cross & Associates, a Schaumburg-based real estate consulting and research firm. "Developers aren't building more homes, they are selling off inventory (homes built but not sold)."

Still, no epidemic of lumberyard closings seems evident, according to Chain O Lakes Lumber owner Ken Jahns.

Jahns, who owns lumberyards in Round Lake and Hebron, said his sales are down 10 percent to 12 percent but profits remain steady.

"I've seen more closings in other years," Jahns said.

Nevertheless, Jahns added he may be forced to layoff one of his nine workers this winter.

Jahns said his smaller lumberyards are able to weather the slow times better than larger lumberyards, which depend more on volume supplied by large housing developments. Jahns also credits a diversified clientele, which includes industrial, commercial and remodeling businesses.

Longtime Roselle landmark business Roselle Farmers Lumber Co. shuttered its lumberyard in October 2006.

At Hines, Wille said the Mount Prospect closing does not reflect on the overall health of his chain of 10 area lumberyards. The Mount Prospect Hines site was small and served a mostly built-out area, Wille said. Hines was able to transfer nine of the site's 15 full-time employees to other sites.

"Our numbers are better than the average for the Chicago (new housing) market," said Wille, who declined to give sales figures.

Hines is laying off workers but some of those are winter season related, Wille said.

The advent of big box home centers such as Lowe's and Home Depot did not hurt local building supply lumberyards much because the big box retailers appeal more to homeowner fixer-uppers, Wille said.

Wille said he expects the home building downturn to last a while longer.

"I would hope that it will (only) last maybe until the third quarter of next year," Wille said. "But that's optimistic. It may last into 2009."