The Moulding and Millwork Producers Association (MMPA), celebrating its 50th year of membership, is holding its annual Winter Business Meeting this week at Talking Stick Resort in Scottsdale, Ariz. Amidst a flurry of recent good news about residential remodeling and new construction and a record-setting Dow Jones that has stocks – at least temporarily – emerging from the so-called Lost Decade, the consensus mood among the leading producers of moulding and millwork products is positive.

Thursday afternoon began with association president Les Baker of Best Moulding Corp., hosting a luncheon in which he recognized sponsors and handed out service awards. The luncheon wrapped up with reflective comments by Frank DeMott, longtime industry veteran of Best Moulding, who has not missed an association meeting since 1968. His comments involved stories from years past that showcased basic business principles that guided mills through tough times and illustrated the value of the MMPA.

One Shining Housing Market

Thursday afternoon sessions began with a presentation on the Phoenix housing market by William French of Cassidy Turley, a land broker in the greater Phoenix area. French minced no words. “I’m bullish on the housing market. I think it’s going to continue to improve over the next few years.”

Indeed, the Phoenix metro area led the country in January-over-January growth in housing values at 22.7 percent. Turley’s presentation showed charts on the number of permits, closings and sales by large production builders; the median sales price of existing single family homes; and the rate of foreclosures over the past four years. All stats support a strong recovery.

What are the contributing factors? French, admittedly biased, cited Phoenix as a great place to live with great weather and affordable housing. Comparing market affordability for homes sold in the Western states in Q3 2012, 80.9 percent were deemed affordable to families earning the median income in the Phoenix market. Compare that to Denver at 78.1 percent; Dallas at 71.7 percent; and Seattle at 67.8 percent. Las Vegas registered 86 percent affordable. California markets remain well behind, with Los Angeles deemed 44.1 percent affordable and San Francisco 31.4 percent affordable.

Other factors contributing to the recovery, according to French, are related to employment. Construction jobs are returning, and both GE and State Farm have plans to expand in the metropolitan Phoenix area, adding highly educated jobs in the process.

But what about the so-called “shadow inventory” that some suggest could plague the market? Referring to the potential that a glut of bank owned (or soon to be banked-owned) properties which exist that could flood the market and create a supply vs. demand challenge, French is not overly concerned. Simply stated, “I don’t think there is as much shadow inventory as some people think.”

It’s not all positive in Phoenix, as the potential for the loss of jobs exists. Neighbor New Mexico was one of six states in the union to lose jobs last year, largely government related. Government gridlock and forced spending cuts pose a potential threat to job growth in Arizona, even as the private sector looks poised to add. And don’t expect a quick recovery in commercial, particularly retail, in the Phoenix area. “I think Phoenix had the most grocery stores per capita in the country,” said French. The rapid growth of residential development in the lead-up to 2008 saw a sharp increase in retail construction to support those communities. Now there are more than a few big empty boxes sitting vacant.

Optimism, But a Huge Challenge Remains

For the final Thursday session, Ed Stadjuhar of Rau Financial Strategies gave a presentation about a major challenge facing the U.S. economy that threatens the housing recovery, titled The Coming Debt Bubble.

With the title, Stadjuhar recalled the tech stock bubble of early last decade and the recent housing bubble and compares those situations to the current U.S. debt problem.

As Stadjuhar pointed out, this was the debt situation end of 2012. Running totals can be found at

Current national debt: $16.5 trillion

Annual revenue: $2.4 trillion

Annual spending: $3.5 trillion

Federal deficit: $1.1 trillion

Scaling it down, Stadjuhar made the numbers easier to digest. This is what the debt figures would look like if applied to a household’s financial situation. In this model, the numbers are staggering:

Bank debt: $163,000

Annual earnings: $24,350

Annual spending: $35,630

Bank loan: $11,280

The largest two holders of American debt are China and Japan, and there are many others with a piece of the pie.

The biggest problem Stadjuhar sees is the stagnation of the economy, and he contributes a large portion of that problem to the manufacturing of goods overseas. “Until we get back to 5.5 or 6 percent unemployment, we’re not going to grow the economy,” he said. Rather than hiring, many U.S. companies are sitting on cash and waiting to see how the health care and tax situations play out in Congress. Since many of these companies have returned to profitability, the stock market is doing well. “But the economy isn’t growing,” Stadjuhar noted.

The other major problem? Ever-expanding entitlement costs, notably Medicare and Social Security, which Stadjuhar warned could eventually eat up the entire federal budget if spending isn’t brought under control. He also noted that it is not truly “cuts” that need to be made, but “freezes” in spending that politicians must address, but are reluctant to do so. “If we could freeze spending where it is, nobody would feel it. But they’ve got to find a way to control entitlement spending.”

The MMPA meeting continues through Saturday. Stay tuned to for more news from the event.

Leave a Reply

Your email address will not be published. Required fields are marked *