{"id":7225,"date":"2021-09-22T00:00:00","date_gmt":"2021-09-22T04:00:00","guid":{"rendered":"https:\/\/bxglobal.wpengine.com\/us\/north-america-market-trends-september-2021\/"},"modified":"2022-06-29T00:31:02","modified_gmt":"2022-06-29T04:31:02","slug":"market-trends-sep-2021","status":"publish","type":"news_media","link":"https:\/\/www.buildxact.com\/us\/news_media\/market-trends-sep-2021\/","title":{"rendered":"North America Market Trends – September 2021"},"content":{"rendered":"

10 minute read\u00a0<\/em><\/p>\n

As we move into the fall season and cooler weather, the blazing hot residential construction market has also started to cool slightly yet is still a significant contributor to economic recovery. However, the virus continues to be troublesome. Navigating the next several months, and as we close out another year of uncertainty, we’ll break down the industry and market trends you need to know.<\/p>\n

The Economy and the Virus<\/strong><\/h3>\n

The state of the economy is contingent upon the state of the virus. The U.S. gross domestic product (GDP) increased 6.6 percent in the second quarter of 2021, as the\u00a0Bureau of Economic Analytics<\/a> reported. Reopening of business and government assistance can be attributed to much of the growth we’ve experienced to date. It means that people are out and spending on goods and services.<\/p>\n

\"\"<\/p>\n

The good news is that housing \u2014 residential investment and consumption spending on housing services \u2014 contributed 15-18 percent of the total GDP.<\/p>\n

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National Association of Homebuilders<\/figcaption><\/figure>\n

According to Ali Wolf, chief economist at Zonda, the \u201ceconomy has recovered from the pandemic and exceeded where we were when the pandemic started.\u201d<\/p>\n

In 2020, forecasters debated the shape of the economic recovery. Most landed on a\u00a0K-shaped recovery<\/a>, meaning that some sectors of the economy \u2014 and certain parts of the population \u2014 recover faster than others. Housing is at the top “K” while many service industries struggle to meet in the middle of the “K.”<\/p>\n

Nonfarm payroll rose in August by 235,000 as the unemployment rates declined to 5.2 percent, a decline of two percentage points since July according to the\u00a0U.S. Bureau of Labor Statistics<\/a>. Most of the gains in employment occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other services. Manufacturing is still down from its pre-pandemic levels (Feb. 2020), which is becoming increasingly evident with product shortages.<\/p>\n

National Residential Homebuilding Highlights<\/strong><\/h3>\n

Residential demand remains high, particularly in the suburbs and\u00a0exurbs<\/a>, yet there aren’t enough homes to meet demand. Market demand, coupled with low mortgage rates \u2014\u00a0the lowest<\/a>\u00a0anyone has seen in their lifetime \u2014 continues to fuel demand. While the average sales rate has dropped from its peak, Ali Wolf notes that we are above our 2019 pre-pandemic.<\/p>\n

In July, we are starting to see a\u00a0shift<\/a>; production builders are slowing down sales due to high material prices and other factors, including lack of labor, availability of materials, and the price of lots. With that, many buyers are showing hesitancy to buy at higher prices. With the uncertainty of what going back to the office looks like, many are\u00a0waiting it out<\/a>. Still, don’t expect prices to fall too much, and it’s not likely that there will be a “true” bubble, like that of 2008.<\/p>\n

National Remodel Industry Highlights<\/strong><\/h3>\n

According to the Leading Indicator of Remodeling (LIRA)<\/a>, the residential remodeling sector has seen annual gains in homeowner improvement and maintenance spending. Because of solid housing sales, price appreciation, and new residential construction activity, Chris Herbert, the Joint Center for Housing Studies managing director, indicates that home remodeling will grow quickly.<\/p>\n

\"\"<\/p>\n

The fragmented remodeling industry has shown levels of growth in the past two decades, and much of the increase is mainly in part to the bigger businesses; they have resources in terms of financial viability to weather challenges. But, as Kermit Baker, a former senior research fellow at the Center and Project Director of the Remodeling Futures Program and chief economist for the American Institute of Architects, points out, a contractors’ specialization is more critical than size.<\/p>\n

National Building Material and Supply Dealers<\/strong><\/h3>\n

The industry continues to see record growth due to the hot housing and remodeling markets, even with limited inventory. So far 2021 has seen some dramatic acquisitions and consolidations, the biggest being the Builders FirstSource\/BMC merger.<\/p>\n

In addition, the difficulty of keeping regular stock items in-house at regular levels is proving to be more difficult.<\/p>\n

Look at the last four solid years of sales growth \u2014 courtesy of the U.S. Census Bureau<\/a> and where 2021 currently sits with January through June results, it looks to be another record year.<\/p>\n\n\n\n\n\n\n\n
NAICS 4441 (Building Material and Supply Dealers)<\/strong><\/td>\n<\/tr>\n
Sales<\/strong><\/td>\n2021<\/strong><\/td>\n2020<\/strong><\/td>\n2019<\/strong><\/td>\n2018<\/strong><\/td>\n2017<\/strong><\/td>\n<\/tr>\n
Full Year<\/strong><\/td>\nTBD<\/td>\n368,610<\/td>\n326,531<\/td>\n320,886<\/td>\n306,211<\/td>\n<\/tr>\n
Jan- Jun<\/strong><\/td>\n211,129<\/td>\n177,332<\/td>\n163,456<\/td>\n158,996<\/td>\n151,284<\/td>\n<\/tr>\n
Growth YOY<\/strong><\/td>\n\u00a0TBD<\/td>\n11.42%<\/td>\n1.73%<\/td>\n4.57%<\/td>\n3.75%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Market Trends to Watch<\/strong><\/h3>\n

With our eyes on the economy and the virus for the near term, there are key residential construction highlights to keep an eye on. We’ll focus on key market trends you need to know each month.<\/p>\n

Building Material \u2014 and Labor\u00a0\u2014 Shortages<\/strong><\/h3>\n

As demand for housing continues, coupled with supply chain disruptions due to the pandemic, it is no surprise that building material shortages continue to be an issue. According to the National Retail Federation<\/a>, there is a lack of shipping capacity at the port level and congestion of vessels lining up to unload. This coupled with labor shortages is making it difficult to get the necessary goods to key dealers and distributors.<\/p>\n

\"\"<\/p>\n

Anticipating a Consumer Slowdown<\/strong><\/h3>\n

As the housing market continues growth through 2022, due in part to low mortgage rates and the Delta variant, it won\u2019t last forever. Predictions show that once businesses are allowed to open (late 2022 and into 2023) consumer spending on home improvement may also slow as pent-up demand for travel and leisure will rise. According to Ivy Zelman<\/a> now is the time to save as you see mortgage rates and inflation begin to rise incrementally.<\/p>\n

The Hot M&A Market<\/strong><\/h3>\n

If you thought 2020 was a hot mergers and acquisitions year, 2021 is looking even brighter. \u201cThe mergers and acquisitions market has never been hotter than since the days of the dot-com startups,\u201d said John D. Wagner, managing director at 1stWest Mergers and Acquisitions<\/a>, LLC. \u201cThere\u2019s a great deal of cash a.k.a \u2018Liquidity\u2019 sloshing around the market, and our firm is approached at least once a day by private equity firms looking for companies to buy.\u201d<\/p>\n

John notes that it won\u2019t last forever. \u201cThe economy is roaring, and money is cheap for now, but if sellers miss this cycle it will be another three to four years to regain the perfect wave we are riding now,\u201d adds John.<\/p>\n

Builder Loyalty, or lack of<\/strong><\/h3>\n

With inventory levels at a low point, today\u2019s builders \u2014 mostly small builders, remodelers, and contractors \u2014 are shopping around to find what they need instead of waiting for their local dealer to contact them with availability and price. And, in some cases, cost is not a barrier, and a personal connection is great but it\u2019s not a deal-breaker.<\/p>\n

“As much as I like to speak with a supplier, and it’s good to know that they are there if we can make it as streamlined and as frictionless as possible to make a transaction \u2014regardless of size or scale \u2014 the better for me. I don’t think that’s just me; it’s just the way the world is moving,” Matthew added.<\/p>\n

Inventory Management<\/strong><\/h3>\n

From regular stock items to customer orders and solutions, managing inventory at the lumberyard has proved to be a challenge today. Some call it the perfect storm<\/a> \u2014 the shutdown did not mean a turndown in business. Couple that with the demand for lumber and the increase in pricing, and the continued lack of labor both before, during, and after the pandemic \u2014 lumberyards are looking for ways to improve the ways they manage inventory. This is leading many lumberyards to make significant upgrades \u2014 in the form of capital improvements \u2014 to their facilities to be more efficient<\/p>\n

Building Material Prices<\/strong><\/h3>\n

July saw the most significant monthly price decrease for lumber \u2014 a 29 percent decrease for the month. While the price is still above January 2020 pricing, it was a welcome adjustment. According to\u00a0NAHB<\/a>, prices have only decreased twice since December 2019 and have seen a 12-month increase of 19.4 percent. The National Lumber and Building Material Dealers Association<\/a> continues to work with the White House and Biden Administration regarding lumber price volatility and supply chain issues.<\/p>\n

\"\"<\/p>\n

Other building materials saw an increase in pricing, including steel at just over 10 percent, drywall increased by 2.5 percent (up 15.8 percent YOY), and concrete stayed level. But this hasn’t stopped many builders from looking at products they can get quickly regardless of price because it’s needed now<\/p>\n

For the last 18 months, the pandemic has led the nation’s recovery and there are still sectors that haven\u2019t quite snapped back, and it won’t be as easy as the housing market has enjoyed. Of course, each region of the county has its own set of circumstances. We are keeping an eye on key regions throughout the country. This month we check out the Southwest market.<\/p>\n","protected":false},"excerpt":{"rendered":"

For the last 18 months, the pandemic has led the nation’s recovery and there are still sectors that haven\u2019t quite snapped back, and it won’t be as easy as the housing market has enjoyed.<\/p>\n

Industry insights<\/span><\/a><\/div>\n","protected":false},"author":1,"featured_media":8339,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"tags":[139],"class_list":["post-7225","news_media","type-news_media","status-publish","format-standard","has-post-thumbnail","hentry","tag-industry-insights"],"acf":[],"yoast_head":"\nNorth America Market Trends - September 2021 | Buildxact US<\/title>\n<meta name=\"description\" content=\"Learn about the construction industry market trends as reported in September 2021 by construction management software company Buildxact.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.buildxact.com\/us\/news_media\/market-trends-sep-2021\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"North America Market Trends - 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