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Housing Mess = Pent-Up Demand For Your Services

November 19, 2008
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Earlier this week the U.S. Commerce Department released October stats indicating that new home and apartment construction have dropped to an annual rate of 791,000 units, a 4.5% decrease from September.

Certain to receive unwanted focus is the fact that this total is the lowest national annualized rate since 1959, or nearly a half-century. Further, applications for housing permits dropped to an average annualized rate of 708,000, the worst on record.

I admit these numbers are startling compared with what we were used to seeing. With the raging mortgage crisis, skyrocketing foreclosures, and continuing job losses, there’s no hope in sight for construction pros. Right?

Wrong. There is hope--lots of it. Take a quick spin on the Internet and do a search for “U.S. Population” at www.Wikipedia.org. You’ll see some drastically different numbers that I hope will bring you comfort.

In the year 2000, the U.S. population was estimated at 281 million. In 2008, our population is estimated to exceed 305 million. That’s a whopping increase of 24 million people in eight years.

What’s more, Wikipedia reports that the U.S. Census Bureau has predicted that the U.S. population will grow to 439 million by 2050. That means there will be 134 million more people over the next 41 years. They all have to live somewhere. And, except for a handful of retirees who managed to keep their pensions intact, nobody will be leaving the U.S.

There’s even better news buried in our population numbers. One quarter of our population (24.6%) are children under the age of 18. Sooner or later we’re going to push these kids--once they become adults--out of our homes. The exception, of course, is if you drop your kids off at a Nebraska hospital immediately.

Here’s what that means for the construction market. About 75 million kids will leave home over the next 18 years. They can only crash on their friends’ couches for so long, and then they will buy a house, which will become a home, which will need maintenance, upgrades and remodeling.

And these 75 million potential homeowners don’t include the millions of new immigrants who still see the U.S. as the land of opportunity. They, too, need somewhere to live.

So even though it doesn’t feel like it, demand is building for your services. At some point, this pent-up demand will provide an explosion of new business for architects, surveyors, builders, distributors and every kind of specialty contractor. It can’t come soon enough.
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housing mess

Mark
November 20, 2008
i agree with Tim. this is why forward thinking contractors,dealers and manufacturers should be preparing themselves. How? take seminars, classes and learn what you can. when we are busy, we never time is the excuse. No excuse now.

Housing Mess

Dan
November 25, 2008
Certainly the long term trend (40 years)is positive but it does not mean a thing if you cannot weather the downturn and the excess inventory and foreclosures that currently glut the market. Our business is down 70% from the peak. We have hunkered down watching every expense and trying to be smarter in everything we do to try and be left standing when the smoke starts to clear. The crisis and the pullbacks in the market have the remodeling projects slowing to a dribble as many home equity lines of credit have been pulled. We have been surviving on commercial projects, but now see that slowing as credit has tightened and many contracted projects are being cancelled due to inability to get cash. Don't know what we do if the commercial projects dry up totally. We have focused on our relationships, quality of workmanship and service, but the lowest price mentality regardless of what the risk of the end product may look like has everyone squeezed. The relationships at least give us an opportunity of a last look sometimes. Our gross margins have contracted by nearly 50%.

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