July 6th, 2020
Roller Coaster Ride
Well the amusement parks have remained closed due to the pandemic but for those missing the thrill of the roller coaster, look no further than the door and window industry. After starting out really fast in the early part of the year, business took a dive in the spring due to stay-at- home orders, plant shutdowns and a general feeling of gloom surrounding the economy. Now that things are starting to reopen, most of my door and window customers are reporting that June has taken off like a rocket. Indeed, June in my neck of the woods looks to be running an average of at least 20% higher the same time period last year. So, what is going on?
U.S. homebuilding increased less than expected in May but permits for future home construction rebounded strongly, indicating that the housing market—along with the economy in general—was starting to emerge from the pandemic-induced drop. An article posted by CNBC states that applications to buy homes surged to an 11 ½ year high in May; this is will surely give the housing market a shot in the arm, spurring more permits and starts in the months ahead. But still how do we explain June?
Well, I informally polled my customers and one thing for certain is that optimism abounds. There are several theories for the uptick.
“Folks have been quarantined in their houses for months now and many have noticed some things that need to be taken care of including new windows and doors,” says one customer.
“They have stimulus money in the bank as well as extra money to spend due to canceled vacation plans. So now perhaps it is time to spend that money on the house, and that includes windows and doors,” says another.
Another trend is that real estate markets are heating up in the suburbs. An economic report by MarketWatch points to a strong real estate market this summer, led by an interest in suburbia. It seems as though the social unrest and riots in the cities have spurred an interest in moving to the suburbs and rural areas. As one real estate agent put it, “People just want to move away from the craziness and have some peace and quiet.” Declining mortgage rates are an additional catalyst.
The RV business is another area that is taking off and that means RV doors and windows right along with it. Reluctance to get on airplanes translates to vacation plans that involve RVs, and many people are finding this experience to be quite gratifying. Instead of hanging out in crowded airports and paying for a $10 hot dog on the way to their destinations, they are parked at a campground watching deer, walking their dogs and eating fifty cent hot dogs cooked on their grill. Maybe they rented the RV for their first experience but now love this change of pace and are now buying one, or they own one already and are buying a better one. The low price of gasoline doesn’t hurt either.
But with this summer surge in business comes one damper and as predicted in one of my earlier blogs: the lack of labor. Workers who became unemployed due to the pandemic are not exactly rushing back to the factories even though plants desperately need them. Perhaps some have a genuine fear of the virus, but the reason I am hearing more often is the $600 per week they are receiving from the government as a result of the Cares Act. It makes going back to work less attractive. Because of this, door and window plants are scrambling to get enough workers to fulfill their orders on a timely basis. I have even heard of one window manufacturer shutting down the plant the last week of July and telling their sales team not to take more orders. The Cares Act is due to expire at the end of this month so hopefully they can add more staff when the $600 no longer dampers the enthusiasm to work.
Morgan Donahue, vice president of sales at Erdman Automation, predicted earlier this year that when the market for automation comes back, “it will do so with a vengeance.” After talking to the plant managers who are pulling their hair out trying to staff their window lines to reduce back logs, I can attest that Morgan is correct.
So, there we have it, the roller coaster is soaring upward. Will the ups and downs continue, or will the wild ride be over? What do you think?