5 Takeaways from the 2023 Industry Pulse
We're in the midst of a slowdown, but that isn't a bad thing
When I wrote the 2023 Industry Pulse report, builder confidence was in a decline of 12 consecutive months. Throughout the past week, however, I received news releases that builder confidence climbed and single-family starts edged higher. Other news indicates remodeling will slow down substantially, but still post an overall positive year.
Despite some of the statistics changing course from when I surveyed the industry and wrote the report, the trend remains the same: The housing industry is in a remarkably different place than it was a year ago.
Although language about recessions, economic uncertainty and housing instability brings back fears of an environment like what we lived through in 2008, a crash of that magnitude is unlikely. “The banks and consumers are in a much better financial position than they were in 2008; defaults on loans are at record low levels,” explained John Moore, vice president of marketing, GED Integrated Solutions Inc. “Home equity levels are high. Additionally, the housing inventory is significantly below potential demand. There are some projections we currently have two to two and a half months of inventory, whereas we had 11 to 12 months of inventory in 2008.”
The Industry Pulse not only revealed information about the economic landscape, but also lent insights into the changing supply chain and material landscape, ongoing labor concerns, product trends and more. Read on for the top takeaways.
1. The supply chain is stabilizing, but materials are expensive.
After three years of what felt like insurmountable supply chain challenges, it at long last is stabilizing. It’s not perfect by any means, but it no longer dominates every conversation. The cost of shipping containers is coming down, many companies have diversified their supplier base so they can acquire necessary materials and demand isn’t as overwhelming as it had been.
But despite a more stable supply chain than we’ve seen in years, materials remain expensive. Nearly all (96%) indicated increased prices in 2022, most of which was up to 30 percent. Three-quarters expect material prices to increase again this year. Wood, aluminum and vinyl shortages are vastly reduced, but glass, hardware and components remain difficult to acquire in some cases. Some companies have responded by re-engineering their product lineup. Several sources I spoke to indicated customers expect quality, delivery and consistent communication around materials and supply chain.
2. It’ll be a flat year for many and a down year for some.
Expensive materials, higher interest rates and reduced demand all add up to about half of the surveyed companies expecting a flat or even a down year. Whereas last year, some companies had to turn away new business, now only 12 months later, companies are actively pursuing new business to try to buffer projected declines. Sales relationships are also changing. Dan Gray, director of sales, North America, Roto Frank of America, says Zoom and Teams meetings are fine for maintaining existing relationships, but new relationships must be formed through face-to-face interactions. And, these relationships are evolving from traditional sales relationships into strategic business partnerships. “They want us to provide products plus the technical expertise to help them with immediate needs, as well as long-term to help them determine how far they can go,” says Darlene Aldred, residential segment marketing manager, Guardian Glass Americas.
3. Labor keeps plaguing the industry.
Labor was a huge problem for companies before the pandemic and supply chain disruptions and it continues to be a huge problem in the aftermath. Companies indicate they’ll invest in employee recruitment and retention and training and education heavily in the coming year. Perhaps one positive outcome of a slowing economy is the ability to retain good people. Sources across the board indicate creating a highly engaged team helps with retention, as do competitive benefits, flexible working hours, good pay, training opportunities and career advancement.
Related reading: Workforce Development & Training
4. Companies will invest in themselves.
The merger and acquisition landscape was buzzing last year, with several notable M&A announcements. Andrew K. Petryk writes about the State of the Market in our Jan/Feb issue. Gray explains that during downturns, companies that are cash-rich tend to have opportunities, especially as it pertains to investing in companies that might be over-leveraged.
Plenty of manufacturers are also expanding on and building new facilities. YKK AP America, for example, broke ground in October on a residential window and door manufacturing facility in Georgia. See other companies' expansion news.
Automation, software and other technology may also be an area of investment focus. Automation can not only help with the aforementioned labor difficulties, but it can also improve quality, reduce failures and save on some of those still-difficult-to-acquire materials.
5. This is the year for new products.
More than 80 percent of companies plan to offer new products this year – the highest percentage since I started compiling this report four years ago. This can be attributed to several reasons. First and foremost: consumer and customer demand. Consumers want customized windows and doors. They want color and design options. Plus, many are living in older homes where the windows are wearing out and it’s time to replace them.
Suppliers to the industry are also pushing out new products. Machinery suppliers are creating ever-smarter and efficient machines and hardware suppliers are creating hardware that can accommodate heavier units. Energy Star Version 7.0 is also driving new and updated product development. Whereas some companies plan to let their Energy Star certification lapse on certain products, more than half are updating their products to meet the more stringent criteria. Stay tuned for more Energy Star coverage from Window + Door in our March/April issue.