May 7th, 2012
Survey Respondents Say Good Things about Housing
It seems that the key statistics affecting the building products industry waver between good news and bad news on a monthly basis. However, there is a growing sentiment that the industry is improving. A recent survey by Brooke Chase Associates underscored the improving outlook of industry participants ranging from building products manufacturers to distributors and builders. While residential new construction still sends mixed signals, the commercial, multifamily and residential remodeling segments have all shown consistent improvement.
Among survey respondents, nearly three out of four reported higher revenues in 2011 than the prior year. For 60 percent of participants, their 2011 revenue was at or above expectations and 80 percent forecast revenue growth in 2012 versus last year. Only 15 percent of respondents believe the industry is still declining, while the rest were roughly evenly split between believing conditions are steady or improving.
The economy has reached what economists view as a critical level of job creation. At 200,000 new jobs per month, the economic recovery is seen as being self-sustaining. Below that mark, it is easier for the economy to slip back into recession. Unfortunately, the recently released April employment figures showed only 115,000 jobs being added. This was well below expectation and below the level of a self-sustaining recovery.
Building products companies are contributing to the stabilization of employment, with a third of respondents in the Brooke Chase survey reporting that they will increase their sales staff in 2012. Sixty percent will at least maintain current levels. One out of five companies will hire additional manufacturing staff.
Importantly, three out of four companies reported that they will keep manufacturing staff levels the same. Given the frequency and size of layoffs in the building products industry, unchanged staffing levels indicate significant improvement.
Remodeling activity has provided a saving tail wind for many companies in the industry over the past several years. While the drop in home prices has led to a significant decline in home equity loans, remodeling still provides many companies with a way of growing out of the downturn. Harvard’s Joint Center for Housing Studies predicts that remodeling will strengthen later this year. The unusually warm winter likely pulled some summer demand into Q1 2012. However, persistently low interest rates and increasing pending home sales are expected to contribute to a meaningful uptick in remodeling activity in late 2012.
A final positive indicator in the door and window industry is a marked increase in the number of companies contacting us because they are seeking acquisition. Some have cash to spend, while others require debt financing. Either case represents a positive opinion about the returns to be earned by investing in this industry right now.