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ISFA Publishes 2017 Countertop Industry Outlook

Posted on 07 March 2017 by cradmin

In the first quarter of every year, the International Surface Fabricators Association (ISFA) publishes the annual Countertop Industry Outlook in its members’ magazine Countertops & Architectural Surfaces. ISFA Communications Director Kevin Cole conducts extensive research and analyzes a variety of statistics to predict the likely outlook for the countertop industry in the coming year and beyond, providing valuable data and indicators for fabricators and associated industry segments.

General Economic Factors

1One of the leading sets of statistics used in the 2017 Countertop Industry Outlook deals with the general economy, which determines the overall economic conditions that may lead to the construction of new homes and businesses and remodels for existing structures that require countertops.

The U.S. Congressional Budget Office reports that the gross domestic product (GDP) in 2016 increased by 1.6 percent, but this is a slight drop from the previous year when growth averaged 2 percent. However, economists believe the GDP will grow at 2.1 percent this year before falling back to 1.9 percent in 2018.

Another general economic factor to consider is unemployment. However, not all sources agree as to what to expect in 2017. The Federal Reserve believes unemployment will drop from 4.8 percent to 4.5 percent while a leading research firm, Trading Economics, says it will remain steady at 4.8 percent throughout the year.

The heated elections in 2016 cast a strong shadow of uncertainty on the construction industry, but according to Construction Outlook by construction consulting firm FMI, industry sentiment ranges from “cautiously optimistic” to “bullish.”

“Favorable general economic conditions, a high level of consumer confidence and the potential for tax reform and increased federal spending all promise to keep the industry on track for yet another productive year,” said Chris Daum, CEO of FMI.

Housing and Nonresidential Construction

Because the surfacing industry is closely related to the housing market, it only makes sense to look at overall growth in the previous year. As a whole, the housing market is far below its peak level in 2006, but it still managed to grow by 6 percent in 2016. However, while single-family home starts increased by 9 percent, multi-family starts fell by 1.2 percent. The regions that are dominating this trend are the South and West U.S.

It also looks like growth will remain positive for nonresidential construction, but it will fall short when compared to 2016. According to FMI, a few points to consider are as follows:

  • All segments of nonresidential construction, with the exception of healthcare, have increased for the past five years.
  • Lodging growth fell from 19 percent to 9 percent.
  • Office construction is expected to drop from 21 percent to 8 percent.
  • Internet sales shared online workspaces are causing commercial construction to fall from 21 percent to 8 percent.
  • Changes in healthcare policy will continue to hold back this segment.
  • Education construction will focus on green building, but less funding combined with increased enrollment will lead to additions and renovations rather than new buildings.

“Commercial construction activity is expected to increase in excess of 8 percent this year, which is slightly above the projection from mid-2016,” states the Consensus Construction Forecast from the American Institute of Architects (AIA).

Home Remodels

Leading economists also predict continued growth for remodels and home 2improvements, but once again, the specific amount of growth is a point of contention. The American Society of Interior Designers (ASID) states that an undersupply of homes for sale and increasing household income will elevate the renovation, remodeling and repair segments to their highest levels since the recession.

Another source, the Houzz State of the Industry Study, predicts that residential renovations will rise by 8.5 percent even though pre-recession levels were passed in 2016 while the Joint Center for Housing Studies at Harvard University predicts home improvement spending to increase at a rate of 6.8 percent in 2017.

Kitchen Cabinets and Countertops

According to statistics in the Trend of Business Survey from the Kitchen Cabinet Manufacturers Association (KCMA), the outlook for kitchen cabinetry has slowed, but the industry remains optimistic.

3In 2016, growth slowed significantly over the previous year after five years of much higher rates. Lower-end stock cabinets fell from 12.3 percent to 4 percent, and fully custom cabinets fell from 13.6 percent to 1.3 percent. However, mid-priced semi-custom cabinets rose from 4.2 percent to 5.9 percent. Interestingly, it is this category that includes the vast majority of sustainably produced cabinets.

The outlook for countertops is spearheaded by the most recent “Countertops” study from The Freedonia Group, which makes market predictions extending out to 2024. According to this report, the demand for countertops as a whole will increase by 4.2 percent, an improvement of nearly 2 percent higher than the average growth between 2009 and 2014. The study also names the top five suppliers for the U.S. market in terms of square feet sold: Wilsonart, Formica, Panolam, DuPont and Cosentino.

Demand for countertops in the U.S. is expected to grow by 4.2 percent each year through 2019 when the market will hit 810 million square feet and $29.3 billion. By comparison, the growth rate for countertops only averaged 2.3 percent from 2009 to 2014.

When it comes to countertop materials, natural stone, laminate and solid surface all surrendered market share in 2015 to engineered stone, commonly known as quartz. Other materials, however, are holding steady with a 12.4 percent share. Other materials, which include concrete, metals and recycled materials, are also predicted to grow at a much higher rate from 2014 to 2019 than the named categories, listed here in order of market share:

  • Laminates – 3.4 percent
  • Natural stone – 5.3 percent
  • Solid surface – 4.3 percent
  • Engineered stone – 5.8 percent
  • Cast polymers – 3.6 percent
  • Tile – 2.6 percent
  • Other – 10.1 percent

A different picture is painted, however, when you take a look at the countertop market in terms of dollars. A study conducted by Catalina Research titled “2015 Natural and Manufactured Stone Product Industry Report” states that natural stone topped the market with a 43 percent share with laminates a distant second at only 18 percent. Quartz is listed a close third at 16 percent, and Solid Surface falls dead last at 10.3 percent.

ISFA predicts, all in all, that 2017 will be a “fair year for market but with less robust growth than 2016.”

Read the full 2017 Countertop Industry Outlook online.

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Outlook Continues to Improve; Can the Industry Keep Up?

Posted on 22 June 2016 by cradmin

spcs-1Several key indicators show that the construction and remodeling industries will continue to improve for the duration of 2016 and likely beyond. However, with the growing economy, unfilled construction jobs are also on the rise, showing that the nation may not have a large enough labor force to keep up with demand.

Home Prices on the Rise

Early this month, Qualified Remodeler reported that the S&P/Case-Shiller Home Price Indices rose by 5.2 percent year-over-year at the end of March as an average of all nine U.S. Census divisions. In addition, even though 10 major cities reported price increases over the year-end in February, the 10-City and 20-City Composites remain unchanged at 4.7 percent and 5.4 percent, respectively. The National Index also showed a month-over-month increase in March of 0.7 percent.

“Home prices are continuing to rise at a 5 percent annual rate,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates.”

Blitzer also noted that one of the factors responsible for rising home prices is the short supply of homes on the market. At less than 2 percent of the number of U.S. households, this is the lowest percentage since the mid-1980s.

“The Pacific Northwest and the West continue to be the strongest regions. Seattle, Oregon and Denver had the largest year-over-year price increases,” Blitzer continued. “The Northeast and upper Midwest were at the other end of the ranking. The cities with the smallest year-over-year prices gains were Washington, D.C.; Chicago; New York City; and Cleveland.”

Interest Rates Remain Unchanged

Just last Wednesday, June 15, the Federal Reserve announced that interest rates would remain unchanged while signalling that rates could still be raised twice before the end of the year. However, six of the 17 policymakers on the board believe that rates will only increase once during 2016.

May saw a sharp slowdown in hiring in the U.S., which has fueled doubts about how strongly the labor market will recover, and Janet Yellen, chair of the Federal Reserve, said the board needs to ensure the market has sufficient momentum to adjust to any rate hikes.

The Federal Reserve forecasts economic growth of 2 percent in 2016 and 2017, which is 0.1 percent lower than the previous forecast.

Single-Family Construction, Builder Confidence Up

Total housing starts were hindered in May by a decrease in multifamily buildings and fell by 0.3 percent, but permits for new construction rose by 0.7 percent. In total, multifamily construction fell by 1.2 percent, and single-family homes increased by 0.3 percent. However, this is an improvement over what had been forecast. April saw a strong surge in starts before the stagnation in May, and single-family construction is now predicted to outpace multifamily.

“Another month of gains in building permits coupled with near record-low mortgage rates provides opportunity for a bounce back,” noted Bill Banfield, vice president of Quicken Loans.

This news came just one day after the National Association of Home Builders/Wells Fargo Housing Market Index rose by two points to 60 on a scale of zero to 100. This index is considered the most reliable indicator of builder confidence available today, and the latest figure marks the first increase in the index since January.

All three elements that comprise the index experienced an increase this month:

  • Sales expectations rose by 1 point.
  • Sales expectations for the next six months increased by 5 points.
  • Buyer traffic rose by 3 points.

“Builders in many markets across the nation are reporting higher traffic and more committed buyers at their job sites,” said Ed Brady, chairman of the NAHB. “However, our members are also relating ongoing concerns regarding the shortage of buildable lots and labor and noting pockets of softness in scattered markets.”

“Rising home sales, an improving economy and the fact that the HMI gauge measuring future sales expectations is running at an eight-month high are all positive factors indicating that the housing market should continue to move forward in the second half of 2016,” said Robert Dietz, chief economist for the NAHB.

Construction Job Openings Remain High

One of the biggest problems the construction and remodeling industries currently face is a high number of unfilled jobs. According to the U.S. Bureau of Labor Statistics and an NAHB analysis, the number of monthly job openings in April is estimated at 200,000, which is a decrease from 215,000 in March. The March estimate is the highest number of job openings experienced by the industry since March 2007.

The overall trend for open construction jobs since the end of the Great Recession has been a steady increase, and hiring by home builders and remodelers remains weak with a decline of 4,400 positions in May and 5,200 in April. However, more than 128,000 jobs have been added collectively by home builders and remodelers over the past 12 months.

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Analysts Give Mixed Signals on Remodeling Outlook

Posted on 12 November 2015 by cradmin

Chart courtesy of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University

Chart courtesy of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University – Click To Enlarge

According to the firsthand accounts we’ve been hearing at CountertopResource.com since our last report, the state of the remodeling industry is incredibly positive. Both contractors and related subcontractors, including countertop fabricators and installers, are enjoying a steady increase in business and in profits. However, a few reports show that the boom may be slowing, and business owners may be facing new difficulties going into 2016.

NARI Says Growth Slowing

In early October, the National Association of the Remodeling Industry (NARI) released its industry analysis, Remodeling Business Pulse (RBP) for the third quarter of 2015. The RBP tracks current remodeling conditions and outlook, and it is professionally organized with data and research by the marketing firm Consumer Specialists.

The report revolves around a final rating that is supposed to be a conglomerate measure of the current conditions for remodelers. The rating is on a scale of one to nine, and a rating of five or higher indicates growth. The RBP rating for the third quarter 2015 was 6.03, which is a sure sign of fair growth. However, this is a decline from the second quarter rating of 6.48.

Breaking the report down into its individual components, declines were measured nearly across the board:

  • Inquiries declined 4.6 percent.
  • Requests for bids declined 4.0 percent.
  • Value of jobs declined by 4.6 percent.
  • Bid conversion remained unchanged.

The analysis provided by NARI states that the leading factor driving growth was postponed projects followed by an improvement in home prices.

“Our businesses are becoming stronger, and that is good, but not as fast as it once was. We are adjusting to slow sustainable growth and are less optimistic, more realistic about what the future will bring,” said David Merrick of the NARI Strategic Planning & Research Committee. “Our customers are being careful about budgeting and taking on bigger projects so leads may be down a little, but the leads we are getting are more focused and on target and budget oriented.”

The future outlook in the RBP showed a picture similar to the analysis of current conditions. The rating for the outlook dropped from 6.07 to 5.79. Fifty-three percent of respondents in the survey stated they see growth in the future while 15 percent they are predicting a decline in business.

Houzz Renovation Barometer Falls

Even though the Houzz Renovation Barometer for quarter three has declined from the previous quarter, the company states that confidence remains high among home renovators. The analysis is broken into six categories: architects, designers, general contractors (GCs) and remodelers, designers-builders, specialty builders-renovators and specialty landscapers.

According to the report, industry optimism by GCs & remodelers fell six points from 78 to 72 even though Houzz predicted only a one-point decline in the last Renovation Barometer. Specialty builders-renovators saw a drop of four points from 77 to 73, but Houzz predicted the category would rise two points to 79.

Even though these drops are quite significant, Houzz focused on the positive aspects of the report. The following stats reflect the year-to-year numbers:

  • New business inquiries increased from 63 to 74
  • Number of new projects increased from 66 to 74
  • Size of new projects increased from 60 to 69

All of these indicators of new business growth fell on a quarter-to-quarter basis, but this may be attributed to the annual winter slowdown.

LIRA Predicts Rise in Remodeling Spending

In October, the Leading Indicator of Remodeling Activity (LIRA) was published by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. LIRA was developed to estimate national spending on home improvements for the current and three subsequent quarters.

According to the third-quarter report, home-improvement spending will fall from $149.4 billion in the third quarter to $148.3 billion in the fourth and $146.9 billion in the first quarter of 2016. However, by the second quarter of 2016, spending is expected to rise to $154.5 billion, which is an increase of 6.8 percent.

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Countertop Industry Forecast Predicts Good Year for Fabricators

Posted on 22 March 2013 by cradmin

The International Surface Fabricators Association (ISFA), which is basically the countertop association, just released its latest issue of Countertops & Architectural Surfaces magazine and it contained a great forecast for the countertop industry for 2013. The forecast, which as far as we know is the only one of its kind published for the countertops industry, takes an in-depth look at what this year, and years beyond, will look like.

The article not only provides a generally summary for the basic economic outlook for the United States, but also digs deep into areas specifically affecting the countertop industry, such as the housing market, both the residential and nonresidential builder markets, home improvement and remodeling and cabinetry. The author provides a lot of good statistical information from a number of resources to back up the forecast, which provides a relatively good outlook for the industry, including specific numbers for the countertop industry itself (provided by The Freedonia Group).

To sum it up, the article points out that the general economy is still a bit sluggish, but when you look at the specific industries that affect the countertop market, the numbers are definitely looking good.

All in all, this great countertop industry resource  (beginning on Page 24 of the magazine) is a must-read for anyone whose business is tied in with the countertop industry. Kudos to ISFA for providing such a report.

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