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Tracking the Elusive Economy
by Dean Lewis
There are only a few professionals who get paid in full
whether they are right or wrong, among them politicians, weather forecasters
and economists. With that caveat in mind, allow me to venture onto their
turf and take a look at the state of the economy and our battered industry.
The Overall Picture
As reported in the Federal Reserve’s September “Beige Book” economic summary,
growth unexpectedly slowed from mid-July through August, with the second
quarter’s gross domestic product (GDP) advancing at an annual rate of
1.6 percent (revised downward from the earlier estimate of 2.4 percent).
This follows a first quarter increase of 3.7 percent and the 2009 fourth
quarter’s 5.0 percent. While concern persists that this progressive cool-down
portends a double-dip recession, most private-sector forecasts are expecting
GDP to rise 2.6 percent overall for 2010—lackluster, but growth nevertheless.
The Construction Industry
While the Bureau of Labor Statistics (BLS) reported that the overall private
sector added 67,000 workers in August, the National Association of Home
Builders (NAHB) said in September that residential construction continued
to shed jobs, falling 9,800 in August, following the loss of 15,400 jobs
in July. The overall unemployment rate for construction rose to 22.5 percent
in August, up from 20.7 percent in July.
This is, of course, due to the lowest level of sales of new and previously
occupied homes in more than a decade, despite very low mortgage rates.
And, the worst foreclosure market since the 1930s has held down selling
prices to less than the cost of building a new house.
As predicted, home sales declined following the expiration of the home
buyer tax credit at the end of June. Yet, the Commerce Department reported
that housing construction jumped 10.5 percent in August, as did applications
for new permits (up 2 percent), although this was led by apartment and
condo construction (up 32 percent) rather than the much larger single-family
sector (up 4 percent). Longer range, IHS Global Insight projects that
housing starts will nearly triple by 2012, to about 1.6 million units
annually, and total home sales will increase 29 percent, to almost 6.5
million.
"Longer range,
IHS -
Global Insight projects that housing starts will nearly triple by 2012,
to about 1.6 million units annually, and total home sales will increase
29 percent, to almost 6.5 million."
Home Remodeling
An increasingly bright spot in all of this is an accelerating home remodeling
market. Both Harvard’s Joint Center for Housing Studies (JCHS) and ServiceMagic
(an Internet-based contractor screening and referral service) note that
existing homeowners are opting in droves to stay put and fix-up versus
trade-up. The trend should accelerate into 2011, possibly spurred by the
pending Home Star program.
The Window Industry
Window replacement in particular has shown impressive growth, according
to ServiceMagic: up 81 percent this year as compared to the second quarter
of 2009, second only to kitchen makeovers as the most popular remodeling
project. Sunrooms also made an impressive turnaround, climbing 21 percent
in the second quarter.
Per the 2009/2010 AAMA/WDMA U.S. Industry Statistical Review and Forecast,
overall fenestration product demand appears to have bottomed out in 2009,
after falling almost 45 percent during its five-year decline. Windows
for new construction fell 67 percent, while those intended for remodeling
and replacement held their own somewhat better, declining by 24.4 percent.
The study projects a somewhat tepid recovery in the demand for residential
windows this year: a 10.5 percent increase overall, comprised of 33 percent
for new construction, but a virtually flat one percent for replacement
products, followed by gains of 21 percent, 45 percent and eight percent,
respectively, in 2011.
We all need to be vigilant, agile and creative with business plans, manufacturing
processes, technologies and marketing strategies—if we are to emerge on
top of a newly vital and growing industry.
Dean Lewis serves as chief engineer, certification
programs, for the American Architectural Manufacturers Association. His
opinions are solely his own and do not necessarily reflect those of this
magazine.
DWM
© Copyright 2010 Key Communications Inc. All rights reserved.
No reproduction of any type without expressed written permission.
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