The Opportunities Will Be Out There Again

John G. Swanson
December 20, 2010
COLUMN : Opening Remarks | Markets & Trends

All good things must come to an end. And while I know not everyone out there thought the $1,500 tax credits for energy efficient windows and doors were a good thing, I doubt few would argue that they did stimulate more window and door sales over the past two years. While the economy limped along, some companies reported record sales in 2009 and 2010. The year-end deadline definitely produced a frantic couple of months for many replacement window manufacturers and dealers as homeowners rushed to take advantage of the credits before they disappeared.

Now here we are in 2011. We have a tax credit—courtesy of the lame duck session of Congress—but it is not likely to be as stimulative for our industry. We had $200 credits for windows and $500 credits for doors before 2009. Virtually everyone I talked to agreed they did not provide much of an incentive for homeowners.

Maybe the new credits will help, but my mood going into 2011 is definitely more subdued than it was going into 2010. Plant closings had slowed to a trickle through much of the year, and then in the last quarter of 2010, we got hit with another wave. A lot of manufacturers still don’t see a lot of growth ahead, apparently, and they continue to consolidate production.

I do believe the worst is over, but we do, as an industry, have some humps to get over. The first is the post-tax-credit lull. The rush of activity at the end of 2010 will no doubt hurt business in the first quarter of 2011, perhaps even longer. Second is the slow-growth economy. We need to see a little bit more momentum, a little more job creation and a little more confidence.

We still have the Environmental Protection Agency’s lead safe work rules to worry about too. We’re waiting to hear about potential post-job test requirements, while as an industry, we’re just beginning to get a handle on how these requirements are playing out in the real world. Reputable companies are doing their best to follow the rules, but it’s not clear yet how many companies are not and how many homeowners are looking to circumvent the additional cost.

We also have to watch our activities on another front. The district attorney for the state of Washington has been coming down on window replacement dealers for high-pressure and deceptive sales practices—and other states are said to be watching. In tough times, companies have to work harder to sell, but the attention attracted by these cases in Washington have other district attorneys looking at our industry and we need to proceed cautiously.

I have no doubt this will be a challenging year. But it will also be a good year to position our industry and our companies for much better times ahead. We can’t lose sight of the positive—and the long term offers much to be positive about.

The new construction market may not come storming back in 2011, but it is growing again. The better news is that despite the crash and large inventory of foreclosed homes, the population continues to grow. Household formations—which create the basic need for housing—have outpaced the new housing market by far over the past couple of years. We may not see housing starts at the 2-million-plus level anytime soon, but we will get back to healthier levels in the not-too-distant future.

The remodeling and replacement market similarly will rebound. A short-term slowdown in replacement window sales as a result of reduced tax credits will be offset in the long run by greater overall market demand. A lot of people may have replaced their windows in the past two years, but a lot of people have held back on spending too. As economic conditions improve and the housing stock continues to age, activity in remodeling and replacement is expected to exceed previous record levels.

And now—thanks to the high-profile tax credits—homeowners thinking about remodeling will be a little more educated about the value of energy efficient upgrades. Of course, based on what I’ve seen in the past few years, I suspect they’ll also be thinking about a bigger, wider-opening patio door. Perhaps a Prairie-style fiberglass entry door to freshen up the front of their home. Maybe windows with a hunter green exterior, woodgrain interior and SDLs. The opportunities will be out there again.