Family income is growing and mortgage rates will remain low, the bricks and mortar to sustain another year of brisk growth in residential construction. That optimism was evident in the halls of the Las Vegas Convention Center, as about 1,600 firms showcased their wares for nearly 100,000 attendees at the annual trade gathering for the construction industry, held Jan. 19-21.
``We're growing all the time,'' said Ingrid Mattsson, marketing communications manager at Uponor Wirsbo Co., a producer of cross-linked polyethylene pipe in Apple Valley, Minn. ``PEX continues to make a name for itself.''
Exhibitor Therma-Tru Corp. of Maumee, Ohio, threw out these numbers Jan. 19 at its news event: Fiberglass doors now make up 14 percent of the total residential door marketplace. By 2007, that share should climb to 30 percent.
Some plastics firms that traditionally have not participated in the show had a presence, including chemicals firm BASF Corp. of Mount Olive, N.J., which emphasized programs like its engineered building envelope system.
Even during 2003, the residential construction market delivered a record year, which beat economists' expectations.
``My own forecast was flat, maybe off a bit from 2002,'' said David Seiders, chief economist with Washington-based National Association of Home Builders. The strength in 2003's market, of course, was the single-family sector. ``We're entering 2004 with good supply-demand balance in single family. It's a great housing forecast, and a very good economic forecast.''
Still, other areas have been affected by the surge in home purchases. The strength in single-family housing will mean more weakness in the multifamily sector as more people move from apartments into their own homes, officials said. Manufactured housing shipments stayed at a 41-year low in November, clocking in at 126,000 units, according to mortgage investment firm Fannie Mae.
According to the NAHB, professional remodelers posted higher year-end numbers in the final quarter of 2003 than in any fourth quarter of the past two years.
``We anticipate that when the final numbers are tallied, the 2003 remodeling market will close at $182 billion, surpassing last year's $173 billion by about five percent,'' said Doug Sutton, chairman of NAHB's Remodelers Council. ``It has been a banner year for the remodeling industry as a whole, and we feel very good about our businesses as we move into the new year.''
But among economic indicators, the persistently weak labor market has created a maddening dichotomy against a substantial pickup in growth of spending and economic output as measured by gross domestic product, Seiders said.
``The weakness of the labor market [job creation and hourly earnings] through the end of 2003 does not mean that stimulative monetary and fiscal policies are failing to work,'' Seiders said. ``Both types of policies are designed to stimulate spending by consumers and businesses, and the immediate measure of success is a higher rate of economic output. Improvements in the labor market are supposed to follow, of course, usually with some lag.''
According to Frank Nothaft, chief economist of mortgage investment firm Freddie Mac, the unemployment rate gradually will decline to 5.5 percent by the fourth quarter. GDP growth should exceed 4 percent in 2004, he said.
David Berson, vice president and chief economist with Fannie Mae, pointed to several factors that will offset weak labor market growth, including expansionary monetary and fiscal policy, a lower dollar, record low inventories, and an aging capital stock that will prompt replacements.
``There is, of course, always the chance that negative shocks could derail the expansion,'' Berson said in his report, citing examples like additional terrorist activity or spiking energy prices. ``But in the absence of such shocks, growth should continue at a solid pace.''
Additionally, Berson said manufacturing is heating up. The monthly survey from the Institute of Supply Management soared to 66.2 in December, the strongest reading since 1983, he said.
``The new orders component skyrocketed to the highest level since 1950, while the employment component remained over 50 for a second consecutive month,'' he said, noting the employment component means more firms were adding workers than laying off. Moreover, small businesses continue to expand, with the monthly National Federation of Independent Business optimism index growing to its highest level since 1983.
As for the interest rate structure, Seiders predicted the Federal Reserve Board would hold short-term rates steady until its first meeting after the November elections. Long-term rates also will increase modestly this year, officials said.