The housing market has been waiting for a rebound since 2008, when the U.S. economy went into free fall mainly due to the subprime mortgage crisis. Well, here we are in 2013 and signs of a comeback are evident. But what happens when housing fully recovers? Some say the value chain—from wood products manufacturers to distributors to trucking companies—might not be able to ramp to scale right away. How will this impact your business and the goods and services the industry relies on to keep the work flowing?
The Timber Products team believes there is reason to be optimistic about the overall outlook for 2013. First, some numbers:
Mainstream media reports housing forecasts from traditional sources such as the National Association of Home Builders. But it is only one of many well-respected entities that have been tracking and forecasting housing data for decades. Others include banks, wood products economic advisory companies, and research firms such as Moody’s. The average 2013 housing start forecast for nine of the top reporting entities is 991,000, compared to actual starts in 2012 of 780,000. (Note: housing starts in 2012 were 28 percent higher than 2011). All forecasts are over 900,000, with one projection as high as 1.2 million. The crystal ball at Timber Products says 925,000. Regardless of the exact number, if we are close to any of these in 2013, the wood products industry should have a very strong year.
The Joint Center for Housing Studies at Harvard University publishes the LIRA – Leading Indicator of Remodeling Activity. The Jan. 17, 2013, report states, “The LIRA projects annual homeowner improvement spending to accelerate to double digit growth through the third quarter of 2013.”
On the housing market overall, Eric Belsky, Managing Director of the Joint Center, states, “Through the first three quarters of 2012, investment in the residential sector was responsible for one out of every six dollars added to our GDP.”
According to the APA December housing report, remodeling spending was “near an annual rate of $130 billion, an improvement of 12 percent over 2011.”
Contingency Planning for Growth
So what we have is a forecast for 2013 that is so strong, many experts are advising contingency planning to accommodate growth. Why? Because the supply chain cannot turn on and off like a water spigot. This thought also comes from Bill Conerly(www.ConerlyConsulting.com), a nationally known economist, author, and contributor to Forbes. The wood products industry is an industry sector he has focused on for decades:
“If I were a betting man,” he states in a January 2013 Forbes article, “I’d rather be long on wood than short. Business leaders in the industry should be prepared for the risk of stronger than expected demand. It sounds good, but unplanned growth represents challenges. Suppliers may not be ready to deliver raw materials, cash holdings may be stretched, and skilled workers may not be available. It’s certainly worth some economic contingency planning,” he concludes.
That’s the bottom line: 2013 could be stronger than expected, and you don’t want to get left out in the cold securing materials and supplies when you need them. Start the dialogue with your suppliers today about your needs this year and get ahead of your contingency planning.
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