Building booms, past and present, are hot topics at IBS
Orlando, Fla. — Perhaps the second half of the seminar title said it all: “How long can the good times last?” A large group of skittish apartment and condo builders attended the multi-family forecast of David Crowe, the chief economist of the National Association of Home Builders (NAHB), here on the second day of the International Builders’ Show. What they hoped to hear was that the high demand for rental units will continue to fuel multi-family starts, which continue to outpace single family starts.
“Even the condo — the lower indicator — has shown some expectations for the future,” Crowe said. “But you’ve gotten to a new [low-vacancy] level for a while now.”
Ron Witten of Witten Advisors, a consulting firm to owners of apartment complexes and multi-family developers, said it was a misconception that people from foreclosed homes are moving into apartments and rented condos. The increase in occupancy levels can be attributed mostly to rented houses, he said.
“The growth has not come from a flight from foreclosed homes but the arrival of this echo boom generation and their ability to get jobs,” Witten explained.
Both men agreed that the health of the multi-family housing industry is tied directly to job growth more than any other factor.
On the single-family home front, a panel that included Paul Hylbert of Kodiak Building Partners in addition to Kermit Baker and Kent Colton, both from the Harvard Joint Center for Housing Studies, discussed the latter two’s new book called “Bigger isn’t necessarily better: Lessons from the Harvard Home Building Study.” The authors polled 78 large production builders in 2003 to analyze whether they used best practices such as using pre-assembled components, installed sales, information technology and supply chain collaboration. The answers give a peek into the homebuilding industry at its peak production but not necessarily its peak performance.
The International Builders’ Show, sponsored by the NAHB, concludes today after Federal Reserve chairman Ben Bernanke addresses the NAHB board of directors in a special session.
At IBS: The case for double-digit growth
Orlando, Fla. — The official housing forecast from the National Association of Home Builders (NAHB) is similar to last year’s forecast — with pent-up demand and improving demographics pointing toward growth in the double-digit percentages.
The problem: Last year’s forecast was — to put it mildly — overly optimistic. During the International Builders’ Show here in Orlando, the NAHB’s chief economist David Crowe explained what’s different this year and why he thinks a 16% increase in single-family housing starts is likely.
"I’m not saying we’re going to have a banner year; I’m saying we’re going to have a better year," Crowe told a crowded conference room of builders and vendors.
Single-family starts are forecast to reach 499,000 in 2012, a 16% increase over the record low 429,000 in 2011. One year later, the NAHB forecasts 660,000 single-family starts.
The scenario for double-digit growth begins with improving macro-economic signals. Gross domestic product is improving. Employment gains show improving. Consumer confidence that languished at 46 in September grew to 64.8 in December, according to the Conference Board. In January, however, confidence dipped to 61.1.
Most dramatically in favor of growth is a relatively new metric in the NAHB’s quiver: the NAHB/First American Improving Markets Index. In September 2011, the index showed 12 markets improving. The February metric shows 98 growth markets.
A year ago, the NAHB’s 2012 forecast follows a 2011 forecast that called for 575,000 single-family starts, which was off by 146,000.
Like last year, the NAHB’s forecast was generally endorsed by Frank Nothaft, chief economist for Freddie Mac.
"We’re coming off a very low number," Crowe said, referring to 2011’s single-family starts figure that was the lowest since the government began keeping track in 1959. "Things are going to get better, not grand. And some places are going to get better than others."
Beacon posts increase in Q1 income
Beacon Roofing Supply has posted first-quarter net income of $19.1 million compared with $10.1 million in the year-ago quarter. The company cited higher sales and gross margin rate, partially offset by the impact from higher operating expenses and a higher income tax provision for the increase.
Total sales for the first quarter ended Dec. 31, 2011, totaled $489.9 million, up 21% from $404.8 million in the same quarter a year ago.
Residential and non-residential roofing product sales increased 25.4% and 15.5%, respectively, while complementary product sales declined 2.6%. First-quarter roofing sales benefited from increased re-roofing activities, which resulted from improved weather conditions and stronger business in markets that experienced storms, and higher average selling prices.
"We began fiscal 2012 with a very strong first quarter. Most of our geographic regions exceeded our expectations by achieving double-digit sales percentage increases and significant operating income growth,” said Paul Isabella, president and CEO. “We continue aggressively to seek quality companies that fit our target acquisition profile, such as Fowler & Peth, which we acquired in the first quarter. We are encouraged by our strong start to fiscal 2012 and expect to continue our steady growth."