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Who's not listening?

The other day, a wholesale buyer mentioned to me how short-tempered customers seem to be lately. When I brought this point up to another business owner this morning, he said the same people who were always short tempered who had now gone a few steps further up the explosion meter. My sense is that we are all under much more business and personal pressure than ever before, and even the smallest things that go wrong seem large.

Whatever the situation, the one thing I know that I have to learn to do better is what we used to teach in sales training-practice that silence is golden. The biggest complaint about sales and customer service people is that we do not listen. Most salespeople would argue that buyers are only interested in price, discounts, quality and service. But according to a recent survey, number one on the list is that salespeople talk too much and do not listen enough. And that same survey showed that this has been the No. I issue for many, many years.

At no other time is it more necessary to shut up-taping your mouth shut to allow for only the occasional nod and grunt of understanding-than when a customer has been wronged or thinks he has been wronged. As none of us can stand to lose too many customers today, we need to understand what the issues are before we can start solving the problem. Indeed, the temptation is to listen to a complaint and jump straight in to answer why, what and how. But after allowing the customer to speak, the real answer is to still keep quiet and nod. What you often get after a long bout of silence is the real answer to what the issue is, because the customer cannot stand the silence and starts off again and the real truth comes out. The reason why silence is golden is that most of us have real trouble with mouthing off, so we skirt around the real issues. Then when there is a silence, we think we need to chime back in. Let it not be you, as this is when the real issues surface.

Early in my career, all too many sales calls began with me introducing myself to the store manager, and then being directed to take my sales bag and myself out of the store-sometimes not so politely. I have even had dogs set on me! Now I knew it could not be me and something must have happened in the past especially when I was the fourth rep they had seen from our company in the past year. There was only one course ofaction: identify the issue, listen, listen, and listen, and allow them to vent. Just because you are listening and they are venting doesn't mean you are agreeing with them. At the end summarize what they said to make sure you have fully understood the issues. Clearly, if there is a mistake, do not try to defend it. Fess up and deal with it, and always go one step further than is expected. If you had wished you or your company had done something better, let them know. Focus on the issues, not on the venom often floating your way. It is not normally personal despite how offensive the other party might be. Displaying patience, calm and real empathy will work better in making sure you solve the problem and put steps in place to make sure it doesn't happen again. Often the hurt party can even give you the solution, but to get it you have to listen. rnHE U.S. housing sector is in its worst downturn in more than 50 years. With five months of data in, single-family housing starts are poised to averagejust 370,000 units at a seasonally adjusted annualized rate (SAAR) in the first half of 2009.

Calls that started badly for me often might not result in a sale, but I knew that solving an important problem for my customer and being willing to take responsibility for it, was the right thing to do. Never did I feel better about a call than when I walked away knowing that I could return the next time, head held high, and I would be welcomed. It would lead often times to more business than the company had ever achieved before. Indeed, I used to be a real masochist and actually enjoy those calls, because many of these negative accounts went on to become our biggest customers. Sometimes the temptation is to back away from complaints, but at the end of the day meeting them head on and not allowing them to fester is the sign of good salesmanship.

Listening leads to trust, lowers resistance, and builds a rapport that endures long after the door closes on this particular chapter. But it's a skill that needs constant practice. Even when your wife screams at you to get outside and mow the lawn, golden silence should prevail, even though I have learned that you can't win them all. Coming, honey!

This is far and away the lowest level in the 59-year history of the series. The question now is, are we likely to stay at these levels and if so, for how long?

Most forecasters believe starts will remain at or below this level. In fact consensus forecasts imply single-family starts of 350,000 units through most of 2010! According to our North American Lumber Forecast (www. risiinfo.com/wtforecasts), this is much too low. Why is that? One need only look at new home inventories to understand why.

Actual inventory of new singlefamily homes for sale have been declining for several years now. In facr, inventories fell to 292,000 units in May. At the current sales pace, this is just over a lO-months supply, too high to encourage builders to ramp up construction. However, inventories will almost certainly continue to fall over the next six months, with the months supply likely to hit seven months by year-end, a level at which builders will begin to ramp up production.

We are quite certain inventories of unsold new single-family homes will continue to fall over the next six months for several reasons.

First, new home sales stabilized in the first half of 2009 around 340,000 units per months (SAAR). Moreover, they increased in April and would have increased in May except it was an unusually short month (typically May has 22 workdays; there were 20 in 2009). With affordability improving (year-over-year new home prices are off llqo and mortgage interest rates are down more than 100 basis points), we conservatively expect new single-family home sales will average 360,000 units over the next six months.

Second, because it takes six to seven months to complete a home from the time it is started, we know how many single-family homes are going to be completed in the second half of this year-around 370000 at a seasonally adjusted annual rate. Now, with 360,000 homes being sold (again at a seasonally adjusted annual rate), you might think inventories should actually be increasing.

However, not all the home started are built for sale. In fact only about 65Vo of the starts in recent quarters were for sale. The rest were built by or for the owner and don't go into inventory. So, of the 370O00 homes that will be completed in the second half of this year, only about 240,000

(SAAR) will go into inventory and 360,000 will be sold.

With seven months left in the year, this means inventories will be drawndown by 70,000 units, leaving us with 222900 units of inventory. At a sales pace of 360,000, this is the equivalent of just over seven months supply.

Once the month supply of new homes gets down to this level, we believe builders will begin to increase single-family home production. While they certainly won't jack production back up to 1.0 million units, we would expect them to work towards stabilizing the inventory of unsold homes. At an annualized sales pace of 360,000, builders would need to produce 550,000 single-family homes (assuming 35Vo of the homes are built bylfor an owner) to stabilize inventories.

So, even if the RISI forecast for single-family housing starts proves overly optimistic (reaching 700,0000 units at year-end), the consensus that single-family housing starts will stay in the low 300,000 unit range (SAAR) through the end of this year is certainly too pessimistic.

- Paul Jannke is senior v.p. of wood & timber information for RISI, a leading information provider for the global forest products industry and publisher o/Crow's Market & Price Service, which offers free trial subscriptions at www.risiinfo.com/ crows. Reach Mr. Jannke at pjannke@ risiinfo.com.