New Construction Archives

Multifamily Housing Sector Weakens

July 26, 2017

Annual United States housing permits in 2016 experienced a slight -0.1% decline from 2015 to 2016. This overall decline is a deceleration from the 14% CAGR between 2010 and 2015. The first decline in multifamily permits since 2009 was accompanied by a low growth in single family in comparison to recent years. Annual growth for multifamily and for single family from 2015-2016 was -9% and 10% respectively, compared to a CAGR of 31% for multifamily and 14% for single family from 2010-2015.

Growth Patterns
Two important market patterns evolved in 2016. Single family growth rates varied from 2% in the Southwest to 13% in the Southeast. Overall single family experienced a 30% reduction overall from 14% CAGR from 2010-2015 to 10% in 2016. The largest single family growth was experienced in the Southeast at 13% and the West with 11% growth. The largest increase occurred in the Southeast with the number of permit units increasing from 245 thousand in 2015 to 271 thousand in 2016.

Multifamily unit construction grew from 2010–2015 with a 31% CAGR but declined at a rate of -9% in 2016. The Northeast was a major contributor to the multifamily permit decline. In the Northeast, multifamily permits dropped significantly by -49%, while single family only increased by 3% leading to an overall decline in the region.

Staying abreast of changing trends in housing permits is a critical strategic consideration for manufacturers and distributors of building materials. The recent 2016 housing permit data shows a shift in multifamily housing suggesting a potential change in terms of product mix and account targeting. Comparing 2016 growth with recent trends additionally suggests the Southeast and West regions will drive demand specifically for companies heavily focused in new single family construction. These growth rates however, indicate a slowing on the single family side as well and warrant an evaluation of the impact on your product demand.

HOUSING PERMITS SUMMARY
A summary of additional findings titled Housing Permits 2016 – Impact on Building Materials Demand is available for download.

Multifamily Housing Sector Growth Narrowing

July 28, 2016

Annual United States housing permits in 2015 grew a healthy 12% year-over-year, a slight deceleration from the 15% CAGR between 2010 and 2014. Multifamily growth continued to outpace single family for the nation as a whole, though this gap narrowed. Annual growth for multifamily and for single family from 2014-2015 was 18% and 9% respectively, compared to a CAGR of 27% for multifamily and 9% for single family from 2010-2014.

Growth Patterns

Several important regional patterns intensified in 2015. West and Southeast regions experienced the highest 2010-2014 single family CAGR and were also the only two regions where the single family growth rate increased in 2015. In the Northeast, multifamily permits have grown significantly faster than single family permits in recent years and 2015 was no exception with a huge 71% increase in multifamily which offset a decline in single family permits.

Several notable divergences from recent trends were also evident. The Southwest region, which was the second strongest in terms of overall growth from 2010-2014, saw a notable slowdown in 2015 and was essentially flat in both single family and multifamily units. Similarly, the Midwest region saw a slowdown in growth for both unit types. The Northeast jumped from fourth to the top spot in terms of overall permit growth, though as mentioned this was notably driven by multifamily permits. The Southeast region also picked up steam in 2015, outgrowing the Southwest and West regions and adding to its substantial national lead in terms of total annual permitted units.

Staying abreast of changing trends in housing permits is a critical strategic consideration for manufacturers and distributors of building materials. The recent 2015 housing permit data shows multifamily housing continues to grow faster than single family, suggesting a potential change in terms of product mix and account targeting. However, an evaluation of recent data highlights the gap in growth rates is narrowing and potentially becoming more regionally focused, particularly in the Northeast. Comparing 2015 growth with recent trends additionally suggests the Southeast and West regions will continue to drive demand for companies heavily focused in new single family construction, as single family growth rates picked up steam while other regions were flat.

Housing Permits Summary

A summary of additional findings titled Housing Permits – Potential Impact on Building Materials is available for download.

Pages from Housing Permits - Potential Impact on Building Material Demand

Single Family Housing Continues Decline in New England Region

March 9, 2016

Changing Market Mix

According to the Census Bureau, single family housing permits in New England fell 11% from 18,749 in 2013 to 16,708 in 2014, and Principia’s year end projections estimate an additional drop of 22% to 12,980 in 2015. In contrast, multifamily housing permits rose slightly to 12,193 in 2014, and are projected to have further increased by 35% in 2015 to 16,425 units based on strong numbers through Q3, particularly in Massachusetts. This surge in multifamily permits leads to a modest 2% growth up to 29,405 total permitted units for the region in 2015.

Permitted Units by State and Unit Type, 2013-2015

Expected Effects

Industry participants serving this area can benefit if they focus on the decline in single family rather than the moderate increase in total units. Single family homes tend to be larger in size and thus more building product intensive than multifamily units. The two unit types essentially flipped in relative importance in 2015, with single family falling from 58% to 44% of all permitted units. This is expected to decrease total demand for most building product categories despite the gain in total units. This effect is likely to be most impactful for products more heavily dependent upon new construction, such as lumber and drywall; it can also be expected to disproportionately affect those that see higher relative usage in single family houses, such as windows and doors.

Product Innovation and Positioning in New Construction

February 18, 2016

Situation: A leading supplier of building materials was evaluating where to aim innovation resources focused on new construction prior to market recovery. A key focus was to identify value creation opportunities with production home builders to avoid high volume low margin business.

Approach: Principia supported a refined product strategy by defining holistic market needs trending with respect to construction methods, building codes and homebuyer demographics. Primary research was conducted with architects, builders, subcontractors, code officials and a comprehensive range of prospective future homebuyers to capture drivers of value important to each audience. New product development initiatives were defined and prioritized for its innovation pipeline ahead of expected demand.

Outcome: The client moved forward with several product initiatives and positioned with its commercial organization to bring new products to market timed with the housing recovery.

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