Collins
by Mike Collins
February 22nd, 2010

Foreclosures and the Outlook for the First Half of 2010

Several housing market analysts predict that there will be another seven million foreclosures over the next few years. While that may sound like a dire prediction, the effect of these foreclosures may not be as extreme as a first glance would indicate. Fewer newly built homes are being added to the inventory of existing homes. Also, the current level of building is seen to be below long-term demand. All of this, combined with the fact that the foreclosures will trickle in at a steady rate, point to a greater level of stability in home sales and, therefore, home prices. All of this bodes well for the residential door and window industry.

A key aspect of the current economic situation that remains to be addressed is the high level of unemployment. In 2000, unemployment stood at just 4 percent, as opposed its current level of 10 percent. This represents a drag on the recovery of the housing market that is otherwise unfolding. Add to this the unusually inclement weather this season (on a recent day, there was snow on the ground in every U.S. state except Hawaii). The bad weather alone has been blamed for the loss of 30,000 to 50,000 jobs. For all of these reasons, it is highly likely that the housing statistics will send contradictory messages for the first half of 2010. Markets struggling to gain traction often behave in a choppy manner, with current headlines and sentiment driving the daily view of the shape of the recovery.

Interestingly, our conversations with manufacturers out in the trenches reveal an equally choppy picture. It would be easy to assume that, in uncertain economic times, dealers would not be getting many inquiries regarding products. In fact, the opposite is true. Numerous companies with which we’re in touch have joked that they’re now in the quoting business, rather than the door and window business. The fact is that many companies are now receiving unusually high numbers of requests for quotes. As the job picture becomes clearer and financing availability returns, most of this quoting activity will be converted to orders. It is incumbent on each company in the industry to ensure that they put themselves in front of their share of that business.



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