Building Products

Building Products Companies Sitting Pretty

John Burns photo

John Burns

September 24, 2015

Two questions:

  1. Which is a bigger industry: new construction or remodeling?

  2. How many $500 billion+ industries can say that they are almost certain to grow 30%, even if interest rates rise?

In a survey at our Summit conference in June, industry executives voted building product stocks as the best risk-adjusted future return. The building products companies are sitting pretty, looking forward to 30%+ growth in new home and apartment construction, which will allow new construction to eventually surpass the remodeling business.

  • New construction. At least 90% of forecasters, including us, believe residential construction will rise at least 30% to 1.5 million+ units because we can all count the number of young adults delaying household formation, and 1.5 million has long been considered a normal level of demand. While the timing will depend heavily on economic growth and interest rates, the demand clearly indicates that the $235 billion spent on new residential construction in the US last year will grow dramatically.
  • Remodeling. Spending on home repair and remodeling has been very difficult to count and forecast, but not anymore thanks to a new report we issued this month! Repair and Remodeling spending should grow 7.8% in 2016, with strong growth thereafter. Barring a recession, we see little downside in the US Repair and Remodeling industry, which totaled $266 billion last year. If mortgage rates rise, which would hurt new home construction, we believe remodeling will benefit as move-up home buyers stay in their existing home with a low-rate fixed mortgage and tap their home equity line to remodel instead of moving.

Thanks to VP Todd Tomalak, a 6-time winner of the Most Accurate Category Forecaster by the Chicago Federal Reserve and previously the Manager of Economic and Industry Analytics at Kohler Co., we have completed the first comprehensive forecast of US Repair and Remodeling done by anyone, ever (at least that we can find). Others have forecast portions of the business but not all of it.

We separated out the 2.2% growth attributable to Natural Disaster (ND) spending in 2014 and have sliced and diced the industry multiple ways:

  • By tenant type: 72% Owner and 26% Renter
  • By project size: 43% Big Projects and 55% Small Projects
  • By labor and materials: 33% Professional Contractor Labor, 41% Materials Purchased by Contractors, and 26% Materials Purchased by DIYers (including ND)

2016 growth will consist of:

  • 7.2% growth in Big Project Spending
  • 10.0% Owner growth
  • 3.8% Renter growth
  • 8.6% growth in Small Project Spending
  • 9.4% Owner growth
  • 2.8% Renter growth
  • 4.0% growth in Natural Disaster Spending if 2015 reaches normal spending levels

After much testing, Todd settled on 18 major industry drivers, and we developed assumptions for each. Some of them, such as demographic shifts, are easy to predict. Others have more uncertainty.

Building Market Intelligence™

Every week, we deliver analysis to over 40,000 subscribers with our Building Market Intelligence™ newsletter. Subscribe to our weekly BMI newsletters to stay current on pressing topics in the housing industry.

About The Author

John Burns photo
John Burns
Chief Executive Officer
As CEO, John grows, leads, and supports a team of passionate, articulate, likable, and smart experts. Together, we solve today so our clients can navigate to tomorrow.

Contact Us

If you have any questions about our services or if you would like to speak to one of our experts about we can help your business, please contact Client Relations at

Products and Services Mentioned

green check icon

Research Membership

Our research services enable our clients to gauge housing market conditions and better align their business and strategic investments in the housing industry. We provide a thoughtful and unique holistic approach of both quantitative and qualitative analysis to help clients make informed housing investment decisions.
green check icon

Building Products Package

Our research subscription provides unparalleled expertise and a unique specialized perspective on new construction and remodeling, backed with exceptional data, for business planning and investor relation support.
green check icon

Building Products Consulting

Our building products team is comprised of industry experts with diverse sector and functional experience. We partner across organizations to provide custom consulting reports to aid organic and inorganic investment decisions, strategic planning, and marketing.

Latest Insights

Unlocking the Potential of Generative AI and Large Language Models for Your Business
Dear Consultant: How do we get more inventory so that the housing market has more slack?
Busting Gen Z Myths—What the Housing Industry Needs to Know