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Builders begin long climb back

By Ken Ryan

Volume 26/Number 17; January 7/14, 2013

The builder market appears to be stirring from its several-years-long slumber. Confidence among builders and, in turn, flooring manufacturers—along with tangible statistical evidence—are the latest signs that the market for remodeling and new home construction is trending upward for the first time in years.

December was the eighth straight month in which builder sentiment rose, according to the National Association of Home Builders (NAHB) and Wells Fargo & Co., which gauges current and future sales expectations and buyer traffic.

The December reading on the NAHB/Wells Fargo Housing Market Index (HMI) was the highest since April 2006. While that index still lags the high readings recorded in the early 2000s, it is a vast improvement from a few years ago.

The improving builder confidence in recent months has been buttressed by the rising tide of the overall housing market, experts said, and the increased number of serious buyers more apt to buy a home.

“The builder market is up, driven by new home construction, both single family and multi- family—multi more than single,” said Allen Cubell, Armstrong’s vice president of resilient.

He believes the builder market will be up in the 10% to 20% range in 2013. “It’s good that the builder is coming back, but of course it’s off a smaller base; it’s not like it was a few years ago.”

John Allen, president of Southern Construction & Design in Madison, Ala., became more confident in the market as the year began. “Demand is still high, and we are taking numerous calls for renovations and new construction projects. We have a backlog of projects, and consumers seem to be ready to move forward despite issues we are dealing with as a country. This may be due in part to the cheap cost of money in the form of long-term interest rates.”

NAHB chairman Barry Rutenberg, a Gainesville, Fla., homebuilder, said the biggest problem builders face is the continuation of tight lending standards. “This is holding back potential sales as many families are having difficulty getting qualified for mortgages.”

Rick Holden, vice president of sales at Derr Flooring, a Willow Grove, Pa., flooring distributor, said lending is still tight, but “I do see more activity in smaller homes.”

Indeed, the trend toward smaller, or what some call ‘micro’ houses, is gaining traction in U.S. urban areas as a way of providing affordable housing nearer to job centers.

On parts of the East Coast, the effects of superstorm Sandy have stirred activity “because so many homes were damaged and some need to be raised,” Holden said.

Others said while Sandy will drive additional business in 2013 in parts of the East, a true and sustainable recovery requires more than storm-related re-building.

Paul Murfin, president and CEO, IVC U.S., said anecdotal evidence suggests builder customers are optimistic about improving business conditions. “However, a large percentage increase on what is now a small base means we are still a very long way from the highs of 2005 and 2006.”

Kim Holm, Mannington’s president, Residential Business, said the builder market showed strong improvement in 2012, “and we expect this to continue through 2013. I would put us in the bullish category.”

Justin Doyle, homebuilder with Justin Doyle Homes, Cincinnati, said there has been an uptick in activity since last spring. “I think people have been tired wait- ing on the recession. Instead of sitting around, the interest rates have moved people. It’s just the perfect time to buy.”

During the downturn, contractors turned to lower end/value products like resilient over more expensive surfaces. That trend continued through the second half of 2012.

“Value continues to be the common theme throughout the industry but we are also experiencing strong growth with Mannington wood in the builder segment,” Holm said. “It’s always our goal to provide exceptional value in every product category, at every price point, and this growth points to that.”

For IVC, a relative newcomer to the builder channel, Murfin said the opportunities “are all about teaching the builder and contractor the qualities and benefits of our products. “Whether the channel grows or not, there is significant share-gain opportunity for IVC. Builder accounts are just now realizing the benefits of glass fiber flooring vs. felt.”

Armstrong, for example, just expanded its most popular vinyl sheet collections—Memories, Station Square and Initiator—to offer builders and property managers enhanced visuals and designs with greater depth, variation and definition. The collections include varied-width wood looks in high-end species like hickory and walnut, and classic stone looks like travertine and slate. “The designs and colors are based on nationwide research with key builders and property managers on want they want to see in vinyl sheet,” Cubell said. “Driving success for our partners are two great products—Handscrapes and Alterna groutable premium tile— that continue to grow several times more than the market.”