Building Products Fundamentals Support Positive Trends in 2022
Consumers are continuing to invest in housing, with positive de-urbanization trends, repair and remodeling growth, and favorable shifts in demographics cited among the drivers of what industry analysts call a “runway for a multi-year housing cycle upswing.” We are seeing strong demand for all building products for both the new construction and repair and remodeling (R&R) markets, with many of our clients sold out deep into 2022.
Building Products Trends and Fundamentals
Real GDP in the United States is predicted to grow 3.9% in 2022, according to the Fourth Quarter 2021 Survey of Professional Forecasters released this November by the Federal Reserve Bank of Philadelphia. The unemployment rate is predicted to average 4.1% in 2022 and 3.6% in 2023.
In December 2021, U.S. housing starts reached 1.702 million (preliminary), an increase of 1.4% from 1.678 million in November and 2.5% above the December 2020 rate of 1.661 million. The NAHB is forecasting total housing starts to increase 2.5% to a seasonally adjusted rate (SAAR) of 1.625 million units in 2022, up from a projected SAAR of 1.585 million units in 2021.
Repair & Remodeling
The Joint Center for Housing Studies of Harvard University (JCHS) is forecasting double-digit growth in homeowner spending on improvements and repairs, with annual spending exceeding $400 billion by Q2 2022.
“Strong increases in home sales activity, household incomes, and home equity levels are supporting a faster expansion of the home remodeling market over the coming year,” says Carlos Martín, Project Director of the Remodeling Futures Program at the Center.
Rising Home Values
Home prices continue to rise; the S&P CoreLogic Case-Shiller National Home Price NSA Index rose 18.8% in November 2021 from a year ago, reaching an all-time high.
Home builder confidence remains healthy, increasing for the fourth consecutive month in December on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The HMI index registered above 80 for 10 months in 2021, according to the NAHB, with a high reading of 84 in December.
Millennials Largest Share of Home Buyers
Demographics provide the momentum for sustained growth in the housing market. According to findings from the 2021 Home Buyers and Sellers Generational Trends Report released by the National Association of REALTORS® (NAR), Millennials (37 years and younger) account for the largest share of home buyers (37%). Millennials have been the largest share of buyers since the 2014 report. Eighty-two percent of buyers 22 to 30 years (Younger Millennials) and 48% of buyers 31 to 40 years (Older Millennials) were first-time home buyers.
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Our Building Products investment banking team is highly experienced in the residential and commercial construction and infrastructure segments. We have successfully completed transactions across a wide range of end markets, from basic building materials such as aggregates, lumber, and pavers and pre-cast products, to complex fenestration extrusions, glass fabrications, curtain wall, and highly engineered specialty coatings products.