Time to Exhale: Everyone Agrees That 2025 Is Looking Up
By Michael Collins
Participants in every industry spend a great deal of time and energy trying to predict the future. We in doors and windows are no exception. Most of us are engaged in the day-to-day manufacture or distribution of building products or provide direct services to such companies. When the predictions of manufacturers and distributors align with competent research firms, we can have a high level of confidence in the direction our segment will take over the next twelve months. This is one of those times of alignment in our industry.
At the recent GlassBuild America conference in Dallas, we reconnected with old friends and associates, and spent most of our time assessing the tempo of our industry across various segments and geographic regions. We spoke to few if any groups who reported that the pace of business was currently declining. Various companies have seen sales soften this year in comparison to 2023. Looking forward, though, those same companies agreed that the outlook is improving. With no exceptions we can recall, the attendees we talked to at GlassBuild predict that 2025 will be stronger than 2024.
Recent Stimuli
There are various reasons for the improved outlook, but not least of these was the recent interest rate cut. There is no profit in debating whether the cut was politically motivated. Rather, companies should be out with renewed energy behind their marketing efforts on the heels of the cut. Several companies at GlassBuild reported that they had received calls in the short time since the rate cut from builders who were pushing ahead on previously stalled multi-family and commercial building projects. The rate cut alone wouldn’t spur this activity, so it is likely that builders see the interest rate cut as a harbinger that inflation is finally coming under control. Others with whom we spoke were in touch with manufacturers who were prodded by the rate cut to give the green light to meaningful purchases of automated equipment. These equipment purchases represent long-term optimistic bets.
Research firms focused on the building industry echo the positive sentiments. In a recent webinar, experts at John Burns Research & Consulting described the impact of COVID and the post-COVID economy on remodeling spending. With the COVID bubble now completely behind us, Burns estimates that roughly thirty billion dollars in remodeling expenditures are “sitting on the sidelines right now.” The recent interest rate cuts and any signs of improving economic performance will pull those sidelined projects to the forefront. Burns predicts that the building industry will “turn a corner” starting in the fourth quarter of 2024. As home equity lines of credit (HELOCs) become more affordable after the Fed cuts interest rates, lower HELOC rates should be responsible for some thirteen billion dollars of that sidelined remodeling spending coming to fruition. Many homeowners are hesitant to sell their current homes that have locked in mortgage rates in the high two to three percent range in years past. The most recent rate cut is not sufficient to push mortgage rates back to these prior levels, but the lower rates will go a long way toward driving remodeling spending.
Fenestration manufacturers are by no means waiting for rate cuts and macroeconomic performance to increase their profits. Instead, they’re offering products that check the most important boxes.
Michael Collins is an investment banker and a partner in Building Industry Advisors. He specializes in mergers and acquisitions in the door and window industry.
mcollins@buildingia.com
To view the laid-in version of this issue in our digital edition, CLICK HERE.