Saturday, May. 17, 2008

Building supply company BMC West closing its Merced lumberyard

By LESLIE ALBRECHT
lalbrecht@mercedsun-star.com

The Central Valley's depressed building industry has claimed another victim.

After 21 years in business, the BMC West building materials store on West 16th Street in Merced is closing, the company announced Friday.

Separately, a leading trade group suggested that the state may be close to the bottom of its housing slump.

BMC West will shutter its Merced and Bakersfield locations within the next 60 days, said Mark Kailer, vice president and treasurer of BMC West's parent company, Building Materials Holding Corp. (BMHC).

BMC West's Merced store employs 25 people. Some of the store's sales representatives will keep their jobs, either relocating to BMC West's Modesto or Fresno locations or working from home, said Kailer.

BMHC announced earlier this week that it's streamlining operations in response to a flagging homebuilding market. BMHC's sales tumbled by 37 percent in the first quarter, resulting in a $33.9 million loss. Now BMHC is combining parts of its BMC West building supplies business with SelectBuild, its construction services operation.

"The difficult decision to close our facilities in Merced and Bakersfield is a necessity based on today's challenging business environment and weakness in the housing markets in California's Central Valley," said Stanley M. Wilson, president and chief operating officer in a written statement. "Single-family housing permits in the Central Valley markets we serve have fallen sharply from 4,905 in the first quarter of 2007 to only 1,877 in the first quarter of 2008. At these greatly reduced volumes, we are no longer able to justify the costs associated with operating these two facilities."

BMC West's customers are mainly single-family homebuilders, said Kailer. That sector's seen a precipitous drop in activity since the building boom three years ago. In the city of Merced, builders pulled a record 1,354 single-family building permits in 2005. In 2007, the city issued 163 such permits. So far this year, builders have pulled 21 single-family permits.

BMHC started bracing for a slowdown in 2005 when construction activity soared to "extraordinary" levels, said Kailer. But no one predicted the severity and length of the slump, he said. "The downturn has been much deeper than anyone expected it be," said Kailer.

News of BMC West's closure comes six months after another Merced building supplier, 84 Lumber, shut its doors. When 84 Lumber's Highway 59 location closed in December, the company said it would convert the building into a production plant. Now that plan has been scrapped. "Due to the continuing decline in housing starts and demand we have made the decision to sell the property and not convert it into a manufacturing facility," said Vice President of Marketing and Public Relations Jeff Nobers.

The California Building Industry Association predicted this week that the state is nearing the bottom of its housing slump. The CBIA said sales and prices of new homes aren't declining as fast as they were earlier this year, suggesting that the new home market could be stabilizing. In March, the state saw a 49 percent drop in new home sales compared with the same period a year ago, a slight improvement over the 57 percent sales drop California saw in February.

In Merced, sales of new homes dropped 80 percent in March compared with last year. In new subdivisions tracked by CBIA, 15 homes were sold, compared with 75 sales in 2007.

The median price of a new home in Merced fell 8.6 percent in March to $309,990, compared with $339,000 last year.

Reporter Leslie Albrecht can be reached at (209) 385-2484 or lalbrecht@mercedsun-star.com.