Lumber Distributors
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 4,600 lumber distributors and wholesalers in the US act as middlemen between suppliers, retailers, and builders. Companies purchase stock and custom-ordered materials from sawmills, plywood and engineered wood product manufacturers, importers, and foreign suppliers and resell them to retailers, builders, lumber yards, and manufacturers. Firms may also provide engineering services or product modification such as cutting or planing wood to specified sizes or thicknesses.
Demand Tied to Residential Construction
Demand for lumber is largely tied to residential construction spending, which is cyclical and influenced by economic conditions.
Fluctuating Lumber Costs
The prices that manufacturers charge for wood products can fluctuate significantly and rapidly, driven by variability in underlying commodity costs.
Industry size & Structure
The average lumber distributor employs 24-25 workers and generates $21 million annually.
- The lumber distribution industry consists of about 4,600 firms that employ 116,000 workers and generate about $98 billion annually.
- Plywood, veneer, millwork, and wood panel wholesalers account for 60% of firms and 49% of revenue. Lumber distributors account for 40% of firms and 51% of sales.
- The industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for 50% of industry revenue.
- Only 1.5% of firms earn $100 million or more annually; those firms account for 29% of industry sales.
- Large firms include Builders First Source, Forest City Trading Group, and US LBM. Some of the largest firms, like Rex Lumber, still operate regionally.
Industry Forecast
Lumber Distributors Industry Growth
Recent Developments
Nov 25, 2024 - Home Builder Sentiment Rises
- Home builder confidence in the single-family market increased in November, marking the third consecutive month of sentiment improvement, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), rose three points to 46 in November 2024. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The NAHB said builders are generally upbeat about the election outcome, and future sales expectations improved in November. The HMI survey also showed that 31% of builders reduced home prices in November, and the average price reduction fell slightly to 5% from 6% in October.
- In the third quarter of 2024, there were about 24,000 single-family built-for-rent (SFBFR) housing starts in the US, up 41% from the same period in 2023, according to National Association of Home Builders analysis of US Census Bureau data. During the four most recent quarters, 92,000 SFBFR homes began construction, which is up 31% compared to how many were built in the previous four-quarter period. While the historical four-quarter moving average market share for SFBFR is about 2.7% (1992-2012), SFBFR’s current four-quarter moving average market share is about 7.5%. Single-family built-for-rent homes provide an alternative for consumers who want more space but are challenged by a lack of affordable housing inventory, high interest rates, and downpayment requirements in the for-sale market.
- The number of building permits issued for single-family, privately-owned housing units, a demand driver for lumber distributors, increased 0.5% month-over-month but declined 1.8% year-over-year in October 2024. Single-family housing starts fell 6.9% month-over-month and decreased 0.5% year-over-year in October. Single-family housing completions dropped 1.4% month-over-month and fell 0.2% year-over-year in October. The decline in homebuilding activity was partly due to project disruptions from Hurricane Helene in late September and Milton in October, according to Reuters. High interest rates and a lack of affordability also continue to hinder the US housing market.
- Multifamily developers’ confidence was mixed in the third quarter of 2024, according to the National Association of Home Builders (NAHB) latest Multifamily Market Survey. The Multifamily Production Index (MPI) rose two points in Q3 2024 to 40 compared to the third quarter of 2023. The Multifamily Occupancy Index decreased by seven points to 75 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. Multifamily developers’ headwinds include a tight lending environment, higher borrowing costs, regulations, and land availability. The NAHB forecasts that multifamily construction activity will remain weak for about another year amid a significant volume of projects under construction. Multifamily construction is expected to return to more robust growth near the end of 2025.
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