Why are equipment sales booming when near-term housing starts are projected to be flat? Possible reasons are:
- CMs know better and expect good growth and need more capacity.
- Some markets will grow well and others will contract.
- CMs buying equipment expect to do better on the same volume of business.
- Corporate tax reductions have inflated capital spending.
- More automated equipment compensates for labor unavailability.
All the above have applicability, but we hear #1 the least, and #5 the most. And many would concur with items 2, 3 & 4.
The experts at Market Watch do forecast declining housing growth for the next three years, but expect a rebound after 2021. This slow growth affects all the major builders, as shown herein (see figure) for a representative sampling of these.
Besides investing in better equipment, most CMs are streamlining systems and focusing on improving profitability and not just volume via some of the following:
- Installing shop floor labor tracking software, like MVP or ShopNet, and using metrics derived to inform component pricing.
- Selling more products to existing customers, such as wall panels or structural hardware.
- Sub contracting or outsourcing estimating or design labor to lower overhead.
- Including all shop-related labor costs in productivity measurement, the “all-in” approach.
Going into 2019, the tenth year of this housing expansion, we are still 15% below the 50-year average for the number of housing starts. All signs point to stability, and not contraction, and continued innovation in our industry.
Best success in 2019 and beyond!