At BCMC, we learned that a recession often follows a presidential election, but that housing may not be much affected this time (per Mark Vintner of Wells Fargo). Many of us shrugged this off, especially after observing the brisk sales activity on the show floor, though our past experience keeps us concerned.
While history has shown that truss sales are directly related to housing starts, the same cannot be said about truss equipment sales. The two steepest declines in housing occurred in 1973–1975 and 2006–2010. Yet, at the Show in Louisville in 1973, we set a record for roof truss equipment sales. We set another record in 2006 at BCMC. Should we now worry since we reached another high mark this year at BCMC? Maybe not, if we examine the marked differences between then and now in the chart below.
In 1973, we were clearly euphoric when business was twice as good as it had been in the previous decade. We built our first new plant in the St. Louis suburbs, and then faced a painful comeuppance right after Gerald Ford became president. The change of administration, though, had little to do with our decline, precipitated by galloping inflation, rising interest rates, price controls, and the painful aftermath of the Vietnam War.
In 2006, we couldn’t help reprising our overconfidence after a decade and a half of housing growth. Our 30 year old memories faded fast as we welcomed construction of a much larger plant, but soon relived the pain of the past – only this time it burned twice as long. Why did we ignore the vulnerability of operating at a level 50% higher than the average level of the previous 40 years? Industry scions, like Calvin Hall, who prematurely predicted the recession were in the minority. In retrospect, even if the boom had extended into 2008, the fall was sure to come.
Partly to blame for our poor plant expansion timing is our uncertainty over what constitutes a “normal” level of business. Our current rise to 1.14 million starts (after we had dropped to half a million) seems to be sustainable. Most economists don’t believe we will relive the pitfalls of the past that eroded housing – high interest rates, spiking oil prices, or raging inflation. We’re still at a level of housing starts that we have experienced only 4 times in our history prior to this recent recession. Mr. Vintner forecasted a gradual interest rate increase of only one percent in the near term. Fracking technology lessens the risk of another oil spike which, in turn, lessens the likelihood of inflation. The numbers of adult children living with parents is not increasing. Those who create new households either have to live under a set of roof trusses in a detached home, or walk over a set of floor trusses in higher density housing; both good trends for our business.