Michael Collins, managing director of Building Industry Advisors LLC in Chicago, says the building products industry appears to be in the sixth inning of its recovery from the Great Recession. Collins pitched his economic baseball analogy during a recent webinar for the American Architectural Manufacturers Association (AAMA) on the state of the door and window industry.

He said those in the industry with whom he’s spoken see multifamily housing as being in the eighth inning, while some geographic areas of the country are only in the fourth inning in terms of an overall construction rebound. However, Collins, a blogger and columnist for DWM, says most agree that this will be an extra-innings recovery.

“The downturn was severe, and the recovery has been long and slow,” he says. “In most recessions of the past 30 years, we have been almost on the way out of one by the time economists agreed that one had even taken place. This expansion is getting pretty long in the tooth. It will be among the longest economic recoveries we’ve ever had.”

Growth in gross domestic product (GDP) has been an outlier in the recovery, Collins says. Uncertainty over the presidential election in 2016 dropped GDP growth that year down to 1.6 percent, compared to 2.6 percent in 2015 and 2.1 percent in 2017. However, it’s expected to continue to rise at a strong pace in the near future.

Interest rates will stay low, but will gradually inch up. Collins sees the rate increases as being a positive sign, because it means the Fed is confident in the economy.

Collins says the current unemployment rate of roughly 4 percent means the labor market is very tight.

“In our economy, that’s about as low as it can possibly get,” he says. “Construction jobs are going unfilled. During the recession, a lot of those workers left, and they haven’t come back.”

He says the cleanup efforts from hurricanes Harvey, Irma and Marie will increase demand on the labor market.

Another problem is a shrinking pipeline of future workers because millennials simply aren’t attracted to the construction trades. Citing a National Association of Home Builders (NAHB) survey of 2,000 young adults ages 18-25, Collins says only 3 percent work in the construction field.

“There’s a real stigma against jobs working with your hands,” he says. “The perception is that construction is low-paying or too physically demanding.”

Still, there are enough jobs being created in the overall economy to feel positive. Since January 2017, an average of 193,100 jobs have been created a month.

“That’s very close to the 200,000 monthly level that indicates a self-sustaining recovery,” he says.

There’s been a resurgence in merger and acquisition (M&A) activity in the door and window industry in recent years, Collins says. There were 21 deals in 2015 and 16 deals in 2016, but just six so far in 2017. Plant expansions are back as well — there were eight in 2016 and two in 2017. Bankruptcies also are way down in the industry – just two total from 2016 to 2017.

Housing is the driver of the door and window industry, and news there is mixed, Collins says.

On the negative side, the inventory of existing homes is low, and single-family housing won’t hit 1 million starts until 2018 or 2019.  (1.3 million starts is considered normal.) And multifamily growth is leveling off. Government regulations at all levels, which ballooned during the Obama years, have increased the cost of an average single-family home by $85,000, he says.

The good news is that the typical size of a home hasn’t shrunk in recent years, contrary to predictions at the height of the housing crash. That means more doors and windows per house.

“People want big cars and they want big homes,” Collins says.

And the residential remodeling market will see growth that exceeds growth in the overall economy, he says. That’s because a third of homes are 45 years old or more, according to NAHB.

Collins then laid out some trends that door and window manufacturers are using to differentiate their products in the market.

Combining indoor and outdoor living space; jumbo glass panels; oversized windows and doors; factory-painted windows  in custom colors; contemporary looks; electronic hardware, automation and smart design; increasing thermal performance; dual-material windows beyond clad wood, such as windows with an aluminum exterior and a vinyl interior; and co-extruded vinyl windows with a different color on the interior and exterior.

Collins also took a look at the regulatory landscape that’s emerging under the Trump administration. He says the biggest takeaway is that the president, whose background is in real estate, is probably not going to support any legislation or regulation that harms construction.

On the legal front, Collins says mold-litigation cases used to dominate in the building products industry. That led to insurance companies excluding mold from coverage. Almost overnight, mold lawsuits vanished, he says. Today, water-penetration lawsuits have replaced mold cases. The most common issue leading to litigation is the way in which two windows are mulled together, because water penetration of mulled units can damage the window and surrounding wall.

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