Overall Growth Predicted for Window & Door Demand

December 1, 2008

The residential window and door industry is expected to post positive growth through 2012, according to research firm The Freedonia Group. It’s not going to be the kind of growth the industry saw pre-bubble-burst, but it will likely be modest, reasonable growth of about 3 percent annually through 2012. Demand should be worth about $40 billion in four years, analysts say—a number that is significantly dampened by the dreary outlook for residential new construction.

The Freedonia Group has recently released its U.S. window market report and forecast, which includes projections through 2012.

Longer term, analysts predict demand for windows will grow at nearly 4 percent per year, mainly due to consumers’ interest in energy efficiency. Storm protection products in coastal regions will also drive demand for windows through 2012, Freedonia Group reports. Demand for doors, on the other hand, will likely perform below the industry, perhaps posting 2.4 percent annual growth through 2012.

Plastic windows and doors will likely experience the fastest growth, according to the Freedonia Group, inching up nearly 5 percent per year to reach $8.3 billion (see table below). Wood windows and doors will continue to account for the largest share of overall demand, totally about 41 percent of the market by 2012. Still, the growth of demand for wood products will be sluggish with the availability of less expensive alternate materials. Wood windows and doors are increasingly seen as higher-end products, analysts explain, and will predominantly be used in upper-end residential applications.

The residential market accounted for 74 percent of total window and door demand in 2007. The U.S. window and door industry remains fragmented, the report says, with most firms posting less than $100 million in annual sales. The five leading producers in the industry—Andersen, Jeld-Wen, Masonite, the Milgard subsidiary of Masco, and Pella—cumulatively accounted for 25 percent of sales in 2007.

The more immediate outlook is not as rosy, but analysts still expect that some silver lining exists in the retrofit market. “Through 2009, I would say that the residential market for windows and doors will remain soft, due to the housing market,” says Matt Zielenski, an analyst with the Freedonia Group. “Completions will be much lower compared to the middle of the decade. Newly-built homes will be smaller in size—thus less room for windows and doors.

“I would argue that the improvements and repairs market would offer better growth in 2009,” he continues. “While most of this is due to the weakness of the residential construction market, some of it will come from homeowners improving the energy efficiency of their homes. For those able to get a loan, now is the time to do renovations and expansions; contractors are looking for work.”

U.S. Window & Door Demand (millions of dollars)

    Avg. Annual Change 
Total Windows & Doors26,83034,87040,0005.4%2.8%
Wood Windows & Doors10,62014,49016,2006.4%2.3%
Metal Windows & Doors10,63013,86015,5005.4%2.3%
Plastic Windows & Doors5,5806,5208,3003.2%4.9%

Source: The Freedonia Group Inc.

Recently-retired chief economist for the National Association of Home Builders David Seiders noted at the association’s Fall Construction Forecast that he believed the steep decline in sales of new single-family homes should be coming to an end in early 2009, setting the stage for “tepid” improvement in new residential construction later this year. However, he warned, that outcome has grown increasingly uncertain in light of the turmoil that has gripped world financial markets.

“Things are a lot worse than any of us had anticipated six months ago,” Seiders said at the conference, and the nation’s housing market–which is the root cause of the collapse in confidence among lenders–has continued to spiral downward. “Risks are piling up on the down side. These are tough times, no question,” he added.

While remaining reasonably optimistic that a housing recovery was beginning to take shape toward the end of last year, “the uncertainties out there are unprecedented,” Seiders said, and there is a growing risk that today’s major housing contraction could get even worse.

“The bottom line is that the financial crisis can’t get much better until the thing that started this thing off, housing starts, gets better,” said Maury Harris, U.S. chief economist for UBS, who also spoke at the conference.

With a regional outlook, Mark Zandi, chief economist for Moody’s Economy.com, noted at the conference that average home prices are down 20 percent from their peaks, and he expects the weak job marketing and waves of foreclosures that plagued the end of 2008 to drive prices down even further in 2009. He predicted in October that the market would reach rock bottom in July this year, but that prices won’t likely bounce back until late 2010. “Nationwide, 27 states are in recession and 14 are very close to recession,” Zandi pointed out at the NAHB conference. Some parts of Texas and North Dakota have escaped the trend but overall the regional picture parallels the national outlook—virtually the whole country started the year in or near recession.

While new home inventory is slowly clearing out, Zandi contends that it will take another two years to shed nearly 1 million excess homes. This means new home construction will probably be significantly depressed through 2011, or perhaps longer, he said.

Still, this type of economic cycle is to be expected and hopefully we can walk away with some lessons learned, Zandi concluded. “Historically speaking, this kind of mess happens every 10 years,” he said at the conference. “But what’s going on now is so significant, it’s searing our collective psyche. We’ve learned something important and changes that policymakers are enacting now regarding the regulation of our banking system will be codified under the next President so that we will have a better system in place at the end of the day.”

For a complete report on what industry representatives expect for the coming year, see the full forecast article in the January issue of Window & Door. The Freedonia Group offers its detailed report, a complete 461-page document, for $4,800. For more information,  visit www.freedoniagroup.com.