Will 2009 Be Better than 2008?
Survey Results for 04/15/2009:
Will your company see sales gains in 2009 over 2008?
The response to this week's poll clearly indicates our industry is not out of the woods. The tax credits may be having an impact, but weakness in the overall economy, tight credit and the persistance of the housing slump continue to take a toll on the window and door industry. Those are all good reasons to remain cautious.
That's not out of line with the economic experts. “The weak housing market and the national economic recession continue to take their toll on remodeling,” explains Nicolas P. Retsinas, director of Harvard University's Joint Center for Housing Studies, which just issued its latest forecast that projects a 12 percent decline in home improvement spending for 2009. “It looks increasing unlikely that this industry will recover until consumers have more confidence in the housing market.”
“Lower financing costs are beginning to stabilize the downturn in existing home sales," adds Kerrmit Baker, director of the Joint Center's Remodeling Futures Program. “However, they have not been enough to offset rising unemployment and falling consumer confidence and encourage homeowners to undertake major home improvement projects.”
Personally, I thought it was interesting that the Joint Center's latest remodeling market forecast didn't acknowledge the energy efficient home improvement tax credits or their potential impact. Not all window and door companies are reporting an improving outlook, but some definitely are. And I would guess that others serving this market–whether it's suppliers and/or installers of insulation, siding, roofing or some other building products–are too. Maybe it's just the optimist in me, but I'm hoping that the Joint Center is wrong, and people like Tyson Schwartz at Gorell Windows & Doors are right. Here's what he reports:
"We are seeing a very nice uptick in business. The last week of February was a turning point for us, and we are forecasting being up over last year, 10 per on the low side to 25 percent on the high side. I would say we will fall somewhere in the middle of this range. The last week in February is about the time the tax credit was unveiled. This is one of the reasons we are seeing an increase in business. There was also a 'washing' out of some of competitors. With Kensington, Republic, and Survivor all going out business, the credibility of the industry was shaken. Even with other competitors purchasing the assets of these companies, warranty issues with dealers are still up in there among other things. Dealers are looking for a stable company that has been in business for a long time. With Gorell, we have a long, successful track record. This reputation has helped us land some very large dealers across the country. It has also kept our existing customers in the fold. This has resulted in an increase in our business across our entire distribution area, which is obviously extremely positive. Finally, the Northern climates are coming out of the worst winter they have experienced in 30 years (literally)! There is a lot of pent up demand because of this, and over the past few weeks we have seen our Northern accounts really gaining their stride."
Not all the factors he points to for Gorell's positive outlook suggest a more optimistic outlook for everyone in the window and door business, but he notes some positive trends that should have a widespread impact on many industry companies. Personally, I think there are definitely reasons to be cautiously optimistic.
Commenting on a report on March housing starts, David Crowe, NAHB chief economist, suggests that single-family starts have remained "virtually unchanged over the past three months." That's "right on target with NAHB's forecast, which anticipates that housing starts will bottom out in the second quarter, after new-home sales have stabilized," he continues.
"While improving interest among potential home buyers has builders more optimistic these days, we don't want to ramp up production until sales of new homes pick up," adds Joe Robson, NAHB chairman. "A cautious attitude about new building is definitely what's called for here, and that's what most builders have wisely adopted for the time being."
So I'll conclude with a cautious bit of optimism–with my own answer to this week's poll question. I'll admit I'm cheating, and not just giving a yes or no answer here, but asked whether 2009 will be better than 2008, I'll say "we have a chance." I don't know if that's an optimistic answer or not, but I will say this, it's more optimistic an answer than I would have given you three months ago.