Promising Outlook in Home Building Bodes Well for the Vinyl Siding Industry
The home building industry started the decade with a spectacular January and February in 2020. Thanks to great weather and a good economy, it was the best first quarter since 2007.
And then COVID-19 hit. Despite the major disruptions caused by the pandemic, there are many reasons to be optimistic about the home building market during the first half of the 2020s, according to the acclaimed “bowtie economist” Elliot Eisenberg.
A longtime senior economist for the National Association of Home Builders (NAHB), Eisenberg is a frequent speaker/consultant on economic forecasts and impacts for home building and other industries using his unique blend of “graphs and laughs” to educate clients. He feels good about the next few years for home building and how vinyl siding manufacturers and suppliers can benefit.
“2020 turned out to be a super year for the industry,” Eisenberg stated. “There was a mediocre recovery in May. But the rest of the year was great because of the profound changes caused by the pandemic, which will have long-term positive benefits for home builders. More kids will be home-schooled permanently. More people are going to work from home. The appreciation of home is greater now than it was a year ago, and we physically want more from our house. Housing services are more valuable than ever before, and now it truly is a place to live.”
“You have to look at the data annually,” Eisenberg said. “In 2019, we built 1.3 million units, followed by 1.4 million in 2020. In 2021, we might hit 1.5 million new units – mostly single unit – which would be pretty heroic. We’re not going to ‘rip the cover off the ball,’ but it will be a good year.”
Eisenberg projects that the next three to five years look even better for the housing industry thanks to what he calls “favorable demographics” and other factors. These include:
- A Rise in Younger Home Buyers. “We’re hitting the younger peak Millennials that will be getting into home-buying. There will be lots of them moving into new homes.”
- More Available Credit. “Credit is harder to get now, but over the next year or two, it will be easier to access.”
- Market-Friendly Interest Rates. “Interest rates are going to stay low for the near future. They will eventually go up, but they will still remain favorable to home buyers.”
- Price of Homes Will Rise. “The urge to build a higher-priced home is much higher than it was two years ago. As the prices of homes rise, that will help home builders, vinyl siding manufacturers and the economy as a whole. Based on this year’s appreciation, prices will keep going up.”
- Single Family Home Building Will Thrive. “Multi-units will still be a critical part of the mix as we all get older, but youth is king as more Millennials want bigger homes on their own land. And with strong demand, limited supply and no inventory, builders should be happy!”
As for the vinyl siding industry, Eisenberg sees tremendous potential for growth given the promising economic outlook combined with the strategic expansion of the Vinyl Siding Institute (VSI) within the past couple of years. He applauds VSI’s increased commitment to workforce development, which could help meet the demand for labor; the market expansion that VSI has achieved through its advocacy efforts, which could address the tight capacity issues the home building industry has been facing; and the continuous improvements in sustainability and product certification that will make home building more scalable.
“Infrastructure is harder to develop because of the bottleneck in prices from China. And lumber prices are through the roof.” Eisenberg stated. “I’m still trying to figure out why, but there’s not enough lumber out there.”
Eisenberg explains that home building is trending towards the south due to lower prices, warmer weather and lower taxes. And with higher-income people continuing to move south, where the vinyl siding market is strong and continues to gain more traction, Eisenberg believes that all the right elements are in place for the vinyl siding industry to “hit it big-time.”
“Inventory is key – every builder should be looking at inventory in their community to see how desperate buyers are,” Eisenberg advised. “And vinyl siding contractors should keep their share and grow their share. Now’s the time to expand, especially with the progress they’re making in new states (with regard to legislative reform efforts to open markets to product choice).”
With home building trends and the VSI moving in the right direction, Eisenberg predicts the next few years as a favorable era for the polymeric siding industry – as good as it gets for the foreseeable future.
“They now need to make an app that lets us change the colors in our vinyl siding,” Eisenberg quipped. “If they do that, I’ll be happy and everyone will use vinyl siding for their homes!”