Photo Credit: Kolbe Windows and Doors
The fallout from COVID-19 will be felt for many years to come. Essentially every contractor in the world had their own personal experience with COVID-19 in regards to its immediate impacts on the health and wellbeing of themselves – friends and family as well as the subsequent economic shutdowns and disruptions in business. At the WDMA Fall Conference, Grant Farnsworth, managing partner of the research organization, the Farnsworth Group, presented a collective view of the challenges contractors are facing and how their behaviors and attitudes have shifted in light of today’s environment. Farnsworth’s research focused on the home building, home improvement and lawn & ranch industry segments to provide some telling insights to help manufacturers and suppliers better understand what they can do to better serve their professional customers.
One of the highlights of the current state of things is the market has seen an increase in demand for new households. Historically, 1-1.2 million new households per year is the norm. Currently the anticipated household growth is expected to be over 1.3 million, which has maintained strong demand throughout the pandemic. While construction unemployment as well as overall unemployment have both risen following the outbreak of COVID-19, they are nowhere near the rates of the 2008 downturn. It is also notable that the construction unemployment rate is actually lower than the national figures. Construction unemployment can be a leading indicator to new and existing home construction and when this is coupled with strong demand for new homes, median household income, strong home values and sales and historically low interest rates, there is cause for optimism.
Attitudes on the Industry
A key element impacting the ability to predict, and plan for, future purchase behavior is confidence. Farnsworth looked at confidence levels as it relates to consumers, builders and contractors. It’s no surprise that consumer confidence began to decline in March. By May 2020, consumer confidence slipped to levels not seen in a decade. It recovered slightly in June before dipping in July and declining further in August, which may be a result of COVID spikes, but it is still in the positive range of the scale.
When it comes to builders, dropped well below the neutral position in April, but then began to increase in June before rising to unprecedented, record levels in September. As such, builders are bullish on the future of new housing construction based on the demand they are seeing that is expected to be a bright spot for the next couple years.
For the first time in more than 3 years confidence among contractors showed signs of weakness and concern about their business and existing market conditions. Remodeler confidence took a big hit this year and these pros still harbor some concerns even as they are starting to see business pick back up. Among replacement contractors, confidence is returning but has stalled; however, it’s important to note that exterior trades are more optimistic.
Photo Credit: Andersen Corporation
Types of Projects
COVID and subsequent “nesting” trends that have come from stay-at-home/work-from-home orders have had an interesting impact on new home construction, remodeling and DIY activity. There have been significant spikes in new opportunities and needs for home office space, landscaping and outdoor spaces, networking and home entertainment and the “healthy home” movement which is particularly positive for windows and doors contractors and manufacturers.
All of these types of projects are examples of items that were not at the top of homeowners’ lists prior to COVID, they absolutely are now. They are not projects that homeowners were planning to get to at some point in the future, they are being initiated now as a direct result of the impact COVID has had on their life. Additionally, people are looking for homes in suburban areas in higher than previous norms.
Housing inventory is as low as it’s been in years, which can have a positive impact on renovations as people want to put more equity into their homes. One of major contributors of low inventory and high demand is that the market has seen a spike in home ownership, which has been accelerated by COVID and people wanting to be in their own home.
Upside to Shortages
COVID caused a number of disruptions in the supply chain and the availability of building materials. This has been affecting purchase behavior and prices. Farnsworth said while this delay has impacted the ability to build affordably and at speed, it’s not necessarily a bad thing. With demand being so high, having somewhat of a cap on rapid building will help avoid the pitfalls we saw in 2005-2007 where the market was overfed with new inventory, causing a precipitous drop in demand, which helped spark the worst economic downturn since the Great Depression.
Photo Credit: Kolbe Windows and Doors
Farnsworth said because of the nesting phenomenon and the impact of people staying closer to home may actually be very good overall for the home improvement and building industry. For once this might be a bright spot for the economy during a recession that can help lead the country to better economic conditions. People are looking at their homes with new eyes. They are reevaluating what they actually want and need from their home, whether they are building, buying or renovating.
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