Windows of Opportunity in 2024

Expect year-over-year volume and dollar growth for the residential fenestration industry in 2024, thanks to a rise in single-family starts, aging housing stock leading to remodeling, and a large intergenerational wealth transfer.

After more than three years of high demand and long backlogs for residential window and door products, the fenestration industry caught a breather to end 2023. Our third- and fourth-quarter Window and Door Market Survey, in partnership with Window + Door Magazine, showed a clear deceleration of growth. Our latest survey, which captured approximately 40% of the industry manufacturer volume, showed backlogs coming down as 56% of respondents reported lower volumes versus fourth-quarter 2022.

For context, manufacturers carried backlogs into early 2023, even as new orders began to decline. 

As the market slowed in 2023 from interest rates and affordability concerns, the question on everybody’s mind is: how will 2024 shape up?

Interest rates are still at high levels compared to early 2022, but macroeconomic conditions are turning more favorable due to:

• improvements in inflation,
• the Fed signaling rate cuts this year, and
• robust employment with continued growth in jobs and wages.

Economists are increasingly optimistic that the U.S. will achieve the soft landing that was hoped for.

Cautious optimism to start 2024

At John Burns Research and Consulting, we survey industry participants with “skin in the game” to give us real-time insights into current and future demand conditions. Homeowners, builders, remodeling contractors and building products dealers inform our thesis on where we think the market is heading. Here are some examples that inform our forecast:

• Our monthly Builder Survey, which captures approximately 20% of all new home sales in the U.S., shows single-family new home sales and starts above seasonal norms since the fall. Builder optimism is fueled by mortgage rate buydowns, which are driving demand from homebuyers.
• Our monthly survey of building materials dealers has shown year-over-year growth for the past four months across most building products categories.
• Our latest U.S. Remodeling Index (surveying nearly 700 professional remodelers) and Kitchen and Bath Market Index (surveying nearly 500 firms specializing in kitchen and bath remodels) shows cautious optimism about 2024 growth. Both surveys note continued demand strength from more affluent homeowners.
• Our survey of custom residential architects showed that 38% of custom home architects are specifying more window openings per home, and 35% reported designing for larger window units.

These results point to an upbeat outlook for the industry in 2024. The fourth-quarter Window and Door Market Survey also showed companies were able to increase their revenue by 4% year-over-year to close out 2023.

Handle your windows (forecasting) with care

While many signs point to demand recovery for the fenestration industry in 2024, there are some clouds on the horizon that can’t be ignored:

• Interest rates remain elevated, and persistent inflation above the Fed’s 2% target likely pushes the planned rate cuts out to later this year. That means for big-ticket remodeling projects such as whole home window and door replacements, borrowing costs will remain elevated for longer. This will likely leave many homeowners on the sidelines. 
• Conflicts in the Middle East are disrupting cargo shipments from Asia, causing a spike to time in transit and shipping costs. This poses further risk of inflation and supply shortages for manufacturers. 

At JBREC, we expect demand growth for windows and doors in 2024 for a few reasons:

• Builders are expecting continued use of rate buydowns to continue to drive new home sales. We project single-family starts to rise 3% versus 2023.
• Nearly half of all existing homes in the U.S. are at least 43 years old. This aging housing stock leads to more homes in prime aging housing stock years, requiring window replacements.
• Interest rates are expected to fall, easing affordability concerns for funding remodeling projects and new home purchases.
• We are in the midst of the largest intergenerational wealth transfer in U.S. history. Trillions of dollars of wealth among households born in the 1940s and 1950s are being transferred to younger generations. This will also help younger generations with down payments for purchases of new homes.

The combination of these factors leads us to expect year-over-year volume and dollar growth for the residential fenestration industry in 2024. Our proprietary Building Products Demand Meter projects installed volume growth for 2024. 

Feel free to reach out to me to learn more about our Demand Meter forecasts for installed volume growth for windows, doors and 16 other building products categories.

Resources from the National Glass Association

• Window & Door Industry Survey Outcomes (Webinar with Chris Beard)
   

Participate in the next Window and Door Market Survey