William Faulkner once said, “Believe that man will not merely endure; he will prevail.” The famed Nobel Prize-winning author could have just as easily been talking about plastic building products manufacturers.
Every light-at-the-end-of-the-tunnel cliché is applicable for construction materials suppliers who, after several months of doom and gloom, are starting to see and hear things that instill in them hope.
The Washington-based National Association of Home Builders announced July 27 that sales of newly built, single-family homes rose 11 percent in June — the third-consecutive month of growth and the largest monthly jump since December 2000.
“Of the housing indicators, nearly every one has turned up in the last month, which is exceptional. We haven't seen anything like that in about 31/2 years,” said Ken Simonson, chief economist for the Arlington, Va.-based Associated General Contractors of America, in a telephone interview.
Historically, the construction industry is still at very weak levels and has a number of challenges facing it — specifically, high unemployment and a tight credit market that is locking buyers out of the market.
“People tend to focus on the bad news, but there are several favorable factors,” Simonson said.
“Certainly unemployment is horrendous, but the fact is, 9.5 percent unemployment means that 90.5 percent of people who want to be on someone's payroll, are,” he said.
“We focus on the negative of falling prices, but it has enormously increased [home] affordability.”
The weak economy, unemployment and the scarcity of credit are the biggest challenges facing the housing recovery, agreed LaVaughn Henry, an economist with PMI Group Inc. in San Francisco, in a July 30 interview.
“Keep in mind, many lenders are still very short of capital, and you need capital to lend,” he said. Bernard Markstein, NAHB vice president and senior economist, cautioned that there will still be bad news sprinkled in, but said he is confident that the recovery has finally arrived.
The absolute level of new housing inventory is lower than it has been for 10 years, Markstein said.
“In July of 2006 there were 572,000 new homes for sale in the builders' inventory. The most recent reading was 281,000. We're getting there,” he said.
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