WDMA Opens on Market ExpectationsJune 10th, 2020 by Drew Vass, Executive Editor
As door and window manufacturers feel the pinch from COVID-19, companies with a strong retail presence may not witness the same downward pressures. That was the tone and message that started the Window and Door Manufacturers Association’s (WDMA) 2020 Technical and Manufacturing Conference this week, proving that industry events can successfully work their way around the current climate through virtual conferencing.
“This is certainly a different format … I’m an old dog learning new tricks,” said Brad Farnsworth of the Farnsworth Group. For companies that have seen declines, those issues might not be as harsh or long-lived as originally expected, Farnsworth suggested.
Data to back those claims came from an annual report his firm conducts for WDMA.
“Overall the market might be down, but maybe not by as much as we were thinking five to six weeks ago,” he explained. “Right now, we’re getting indications that the new residential side could be bouncing back a lot quicker than people expected.”
While the message wasn’t as positive on the commercial side of the industry, where a comeback is expected to be tougher and more elongated, companies with strong retail involvement on the residential side have produced numbers that are “astonishing” Farnsworth said, including double digit growth rates as late as May. “We’ve seen an awful lot of DIY activity,” he said. “That bodes well for manufacturers that have to continue refilling the pipeline.”
While admitting that indicators are quick to change, after updating his company’s findings about a week ahead of the conference, predictions for the two years ahead shows, “Overall, there’s a mixed bag on macro-drivers,” he said. “But things may have already bottomed out in this arena.”
Among windows, demand is expected to fall annually by about 6.5% in 2020, following a 3.3% increase in 2019. In 2021 and 2022, however, those changes are expected to reverse to the tune of around 10% increases. Entry doors, he said, already took a hit in 2019, to the tune of -3.4%, which will dip further in 2020 by -5.6%, before seeing 5-6% increases in 2021-22. Following a robust year in 2019 for sliding patio doors, at +8.4%, more modest hits are expected for that segment in 2020 at -1%, before a slight improvement in 2021 by 2.5%. Similar results are expected for hinged patio doors.
Among key market drivers, household growth receded to 1.1 million, but is still well within the expected historical norms, Farnsworth said. The latest growth figures are also twice what occurred amid the last recession, which he pointed to as a positive sign for delinking current economic conditions from housing. “Unlike the 2008-09 recession that was housing driven, this recession isn’t housing market driven,” he said, further assuring that, “It’s simply due to an external event and will be far shorter lived.”
April sales of new homes dropped from around 4.7 million to just under 4 million on an annualized basis, he said, adding that, “We’re already beginning to see the existing home market stabilize and even rebound a little bit. The same is true for new home sales.”
As a key indicator of market strength, prices for new and existing homes prices grew from 2011 through April 2020, he said, and aren’t expected to plummet like they did amid the last recession.
Based on anecdotal feedback from builders, the market may have already bottomed out, while heading for a rebound, Farnsworth said, suggesting, “That’s our sense at this point in time.”
Regarding other key economic indicators, as expected, COVID-19 has prompted unemployment to jump rather drastically and immediately, he said, but not quite to the degree originally expected. Meanwhile, “Most analysts expect that to drop down fairly quickly as parts of the country open up,” he said. And while under the circumstances labor participation has plummeted, the market may not see the same shortage of professional workers in construction this time around, compared to the recession, he suggested.
Entering the pandemic on a high note, household incomes rose steadily over the past several years, reaching an average of $64,917 in 2019. And while that figure is expected to decline “a little bit,” he said, by 2021 incomes should resume a positive climb. In the meantime, “Household income has been supported rather strongly amid the CARES Act,” Farnsworth said.
In its opening day, the event pivoted to topics including green building and standards development for installation of doors and windows. Stay tuned to [DWM] for additional coverage.