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To Outperform the Recovery, Building and Construction Professionals Should Plan for a Stronger than Normal Demand in Q1 2013


While hopes remain high for continued improvement in the housing sector, research indicates that remodeling expenditures are likely to jump in the late first quarter (and early second quarter) 2013.  A healthy demand for remodeling, coupled with a recovering home construction market will create demand not seen in building products for several years.

Building product manufacturers, suppliers and professionals should ready their business as contractors, builders and homeowners expect faster, efficient construction completion cycles.

Forecasts for strong demand in early 2013 indicate the industry could see 13-18% (year over year) first quarter increases. This estimate is substantiated from several different perspectives:

Building & Construction Revenue Analysis

Ducker Worldwide’s proprietary research and analysis team looked at changes in revenue among 150 leading firms in the building and construction industry.  Analysis of historical first quarter over first quarter revenues of both public and private building and construction companies reveals a 9% increase from Q1 2010-2011 and a 12 % gain in Q1 2011-2012.  Further evaluation points to increases in excess of previous years in the same time period for 2013, prompting Ducker to anticipate an increase of 16 % or higher for the first quarter.

Source: Ducker Worldwide Proprietary Analysis of Change in Revenue among Leading Construction Product Companies

Residential Remodeling Permits Analysis

Residential remodels authorized by building permits as reported by BuildFax have consistently risen in the first quarter from 2010 to 2011 and from 2011 to 2012 and, conversely, have declined during the second quarter.  The year over year increase from Q1 2012-2011 was 3.2% and rose to 8.72% for Q1 2011-2012.  Ducker Worldwide concludes that an increase is imminent, based on historical changes in data and the expected rebound for the first quarter of 2013.

Source: BuildFax Remodeling Index

Homeowner Improvement Expenditure Analysis

Homeowner improvements monitored by the Leading Indicator of Remodeling Activity and US Census Bureau are tracking to continually increase as 2012 comes to a close.  Year over year first quarter analysis reveals a decline for 2010-2011, an increase of less than 5% for 2011-2012 and upwards of 12-15% forecasted for 2012-2013. Ducker Worldwide anticipates that some activity will rollover into first quarter 2013 resulting in stronger than anticipated rate of change figures, and subsequent increases in improvement expenditures.


Source: LIRA-The Joint Center for Housing Studies of Harvard University; Percent change data, Ducker Worldwide

Housing Starts Analysis

A historical analysis (Peak to Trough Cycle Analytics) of housing start growth and decline over the past cycles indicates the US is at the beginning of a gradual recovery which will be classified more as low sloped versus steep sloped.    Relative to U.S. single family homes, the Canadian housing market experienced a shorter decline and “recovery” and Canada has already reached 80% of its peak market in a short period of time.    According to the data, 2013 represents Year 3 in the model – which indicates a higher rate of growth than in 2012.  This, coupled with strong demand for remodeling in the first quarter – will create a banner year in construction industry demand not seen in the past 5 years.

Source: US Census & Ducker Worldwide

While historically quarter over quarter increase typically occurs, Ducker expects the degree of increase in 2013 Q1 to be substantially higher than in previous years.  Capitalizing on Q1 and Q2 2013 surges in activity will require preparation and speed with well-defined growth objectives and plans in order to take advantage and outperform the recovery early next year.

Determine whether your business is prepared to take advantage of growth potential in 2013:

  • How will your company properly plan for inventory levels to support demand?
  • What methods are in place to better manage your fulfillment performance and delivery process while still maintaining profitability goals?
  • How effectively can you control the speed of your order processing to ensure fast, broad and efficient delivery?
  • Do you have adequate and properly trained labor to process increases in production?
  • Has your team evaluated its logistics system and delivery cycle to determine the proper product selection, quantity of procured products, storage and transportation?
  • Have teams identified and solved any inefficiency in the manufacturing process and corresponding assembly lead times?
  • Is your organization prepared to support growth with proper marketing messages and an effective and knowledgeable sales force?

While most building products companies claim they will “outperform” the recovery, Ducker Worldwide has identified several key elements that will determine whether companies will truly gain share and grow faster than the industry. 

In anticipation of an increase in demand, Ducker is currently assisting companies in:

  • Developing a strong fact base driven by research from customers, distributors and competitors
  • Determining which channels offer  the highest volume options and profitability
  • Aligning their pricing strategy to maximize sales potential
  • Adjusting inventory levels and route to market
  • Streamlining operations and managing margins
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