In this 12-minute podcast interview, John Burns shares some of our research findings that our building product clients receive regularly.
The new normal is 1.4–1.5 million annual US housing starts because of:
- Overbuilding. We are still recovering from the massive overbuilding in the late 1990s through the early 2010s. Contact John or Chris Porter if you want to be walked through the clear support for this contrarian, but thus far highly accurate, forecast they published in our book Big Shifts Ahead several years ago.
- New source of housing supply. While the lack of new homes is helping demand for resale homes and thus it appears like few buyers are selling, we are actually at the beginning of a steady increase in empty resale homes put up for sale by the heirs of the earliest baby boomers. Chris and John also uncovered this in our book Big Shifts Ahead.
- Local jurisdictions making affordable new homes difficult to provide. 15 of the 18 publicly traded builders now have average sales prices above $350,000. See our more detailed blog from three years ago on many of the reasons why.
Falling construction in 2019. Construction volumes will likely decline modestly—by about 3%—this year
- Fewer communities. Home builder actively selling communities have declined 1% year over year.
- Apartment pullback. Highly volatile multifamily development capital has pulled back recently.
Bullish remodeling. We remain big bulls on the future of the repair and remodeling (R & R) market.
- Low risk. R & R feels almost risk-free to us.
- Big differences by company. There are significant differences by category, price point, and geography. Todd Tomalak can share some of these differences with you. He manages our monthly building products reports and surveys.
- 6% growth in 2019. We expect 6% growth in remodel spending in 2019 when you strip out the likely decline attributable to the increased spending caused by the excessive natural disasters of the last two years.
- 5% more projects. The number of R & R projects should grow 5% this year, driven by several shifts in the economy.
- Lower specification levels. We expect a pivot to lower-cost products. This pivot has historically occurred when sales price appreciation slows.
- Kitchen and bath is looking good. Our new survey with NKBA paints a bright future for kitchen and bath.
Last to know.
Building products companies tend to be the last to learn of shifts in housing demand, mostly because of the slow feedback from the supply chain. Last year, our new home sales survey showed significant slowing in June, and our survey of lumber and building material dealers didn’t show a slowing until November. If you want to stay five months ahead of your competitors, subscribe to our research.
