From JBREC: An outlook on the building products market
According to John Burns Research and Consulting (JBREC), there are some silver linings in the housing market.
JBREC provided an economic snapshot to members of the National Lumber and Building Material Dealers Association (NLBMDA) this week while providing highlights from its most recent Building Products Dealer Survey.
Matthew Saunders, senior vice president of building products research at JBREC, noted that while inflation has come down it remains well above the Fed’s 2% target range.
“The Fed was behind the curve of maintaining the rate of inflation,” Saunders said while noting interest rates have rapidly increased this year as mortgage rates jumped to 7.2%.
The rates have made current homeowners reluctant to sell their homes, causing a lack of existing homes on the market. Also, owners aren’t ready to pull equity from their homes for remodeling projects given the level of interest rates.
Housing supply and mortgage rates have also combined to make buying a home as difficult as ever for many Americans.
“Housing affordability has reached unprecedented levels,” Saunders said.
More home builders are finding a solution to the problem by turning to smaller homes and switching out some materials to lesser-priced products, according to Saunders. This strategy could lead to a 9% decrease in annual construction spending in 2023 on a year-over-year basis. Saunders said JBREC views smaller home sizes as a trend that will continue for several years.
While the labor market is cooling off a bit, it remains resilient with unemployment remaining below 4%. But some builders and manufacturers are still having issues when it comes to finding labor.
Chris Beard, director of building products research at JBREC, said July survey results also showed that building material orders decreased 3% for the month on a year-over-year basis but remained flat in June.
In contrast, trusses and millwork saw 7% growth in July as windows and doors increased 6%. Decking and railing also saw 2% growth in July.
Pointing to growth of orders for trusses, Beard said a new joke around the JBREC offices has become “Truss us” in regard to proclamations of gains in construction spending.
Survey results are now available to NLBMDA members through a new partnership that was struck up with JBREC in July.
Looking at long-term drivers, JBREC forecasts that millennials will drive 12.7 new households in the 2020s. The firm says about 17.1 million new homes will be needed during the decade to meet demand and make up for the current shortage of 1.7 million homes.
On the repair and remodeling side, 24 million homes will reach “prime remodeling years” by 2027. Adding to what could be a remodeling surge are the 85% of homeowners who are currently locked into rates below 5%.
“The average homeowner has $333,000 of equity in their home,” Saunders said.
Saunders also noted that as rates decrease, homeowners will have solid equity to pull from for remodeling and repair projects.
The NLBMDA asks that those who tuned in and participated in the seminar given by JBREC please use the QR code pictured here to take part in an association survey, regarding feedback for the presentation.
