Is it Our Time in the Sun?
Not too long ago, the construction marketplace—and the residential sector, in particular— led the national economy in a race to the bottom. Other sectors fared somewhat better, but only by comparison. Now, the tables might be turning.
Consumers are considerably more positive about current business and labor market conditions. According to Thomson Reuters and the University of Michigan, the Consumer Sentiment Index increased for the third consecutive month this June, reaching its highest level since January 2008.
Whether this is akin to whistling past the graveyard remains to be seen, as many statistics do not bode well for the economy as a whole.
For example, the Bureau of Economic Analysis estimate of real GDP growth for the first quarter of 2013 has been revised downward to a disappointing 1.8 percent. A 3 percent growth rate is apparently necessary just to provide enough jobs to keep up with population growth, leaving us in the midst of the weakest recovery since World War II.
Household finances continue to be difficult. In 1989, the average debt-toincome ratio for an American family was about 58 percent; the latest data from the Federal Reserve shows it to be nearly 160 percent. In the 1970s, only about one American in 50 was on food stamps. Today, that number has grown to more than seven out of 50. Bankrate. com notes that more than one in four Americans have no savings whatsoever, while nearly 44 percent have just three months’ savings or less.
National debt continues to grow unabated; Middle East turmoil and resultant periodic oil price spikes continue to escalate; and the European economy is arguably worse yet.
On the Bright Side
That said, given the powerful forces of demographically driven demand, rising home values and prices, low—albeit bottomed out— interest rates, fewer foreclosures and greater overall optimism, even the most die-hard skeptic has to admit that things are starting to pick up in the residential construction industry. From the vantage point of the National Association of Home Builders’ mid-July “Eye on the Economy” update, a formidable array of statistics bears witness.
Existing single-family home sales, as reported by the National Association of Realtors, were up in May by nearly 13 percent over May 2012. Furthermore, the NAR Pending Home Sales Index for May, based on signed but not yet closed contracts, was the highest since late 2006.
Indicating that a large portion of the financial toxicity has been wrung out of the market, some 18 percent of May 2013 sales were foreclosures and short sales. This was down from 25 percent during the same month a year ago and represented the lowest share since October 2008.
As for new construction, the Commerce Department announced July 1 that total U.S. construction spending rose in May to the highest annual rate level since September 2009. Spending on new single-family homes rose at a rate unseen since August 2008, increasing on a year-over-year basis by more than 33 percent.
“[Housing construction is] solidly on the path to recovery, even as the pace of improvement is slowed by ongoing challenges related to the availability of credit, labor, lots and certain building materials,” said David Crowe, NAHB chief economist. Thus, as Anirban Basu, chief economist for the Associated Builders and Contractors noted, “Progress will remain gradual.”
These positive signs in the housing marketplace bode well for fenestration. According to the “AAMA/WDMA 2012/2013 U.S. National Statistical Review and Forecast,” window shipments for new construction and remodeling and replacement are projected to reach more than 57 million units by 2015, a 44 percent increase from 2012 numbers. Similarly, patio doors are expected to increase by 46 percent and residential skylights are expected to increase by 27 percent by 2015.
While skies above might not be clear again, they are at least only partly cloudy in our industry’s neighborhood. It could once again be our time in the sun.