Housing Supply Sales Through the Roof: Sign of a Quick Recovery?
Intrigued by a report that a Pleasanton, Calif., company you probably never heard of had a surprising surge in sales in the first quarter of 2010, HousingWatch dug a little deeper around the edges to see how the nuts-and-bolts industries related to housing are faring,
Simpson Strong-Tie, a subsidiary of Simpson Manufacturing, just reported sales of its structural connectors; anchors and other products for new construction; retrofitting; and D.I.Y. markets had grown by 13.4 percent over the same quarter a year ago.
Growth was strongest in the Midwest and West (excluding California) and the Northeast, but flat in California and the Southwestern states.
This must be good news for the housing market, right? Not so fast.
"Its probably an aberration," says Kermit Baker, senior research fellow at Harvard's Joint Center for Housing Studies. Although privately owned housing starts were up slightly in March over the previous month and up 20.2 percent over a year ago, according to the Census Bureau, "there's still not a lot of construction out there," Baker adds.
The Simpson Strong-Tie sales increase probably relates more to pent-up demand for materials after a prolonged downturn, as well as leaner inventories and higher prices for construction products. In other words, the market for these materials has been stagnant for so long that even the slightest uptick looks more auspicious than it actually is.
In fact, companies that supply building materials for home and office construction would be happy to just see some signs of stability, according to the Wall Street Journal.
For example, USG, the nation's largest distributor of drywall, lost $110 million in the first quarter compared to $42 million in the first quarter compared to a year before. At the same time USG hiked prices on drywall 20 percent in March, and so did Eagle Materials, which makes wallboard. Framing lumber prices are also going up -- part of moves by companies to balance low volume with higher revenue.
The bottom line is that housing starts and construction remain weak by historic standards. There are signs of recovery, but not enough, no matter which tea leaves you want to read.