Caba Soft Market Vshort

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Caba Soft Market Vshort

  1. 1. Implications of the Soft Housing Market on Suppliers of Building Products CABA’s Internet Home Alliance Research Council Family Ecosystem Forum October 30, 2007 Benton Harbor, MI
  2. 2. NAHB Research Center Overview <ul><li>Lab Testing & Certification </li></ul><ul><ul><li>Products & installation processes </li></ul></ul><ul><li>Quality Assurance Programs </li></ul><ul><li>Market Research </li></ul><ul><ul><li>Syndicated & custom research </li></ul></ul><ul><ul><li>Qualitative & quantitative </li></ul></ul><ul><ul><li>Applied & theoretical </li></ul></ul><ul><ul><li>www.housing-commercialization-tools.com </li></ul></ul><ul><li>Field Evaluations & Demonstrations </li></ul><ul><li>Information Dissemination Through ToolBase.org </li></ul>
  3. 3. Completed June 2007 State-of-the-Art Lab & Market Research Facility
  4. 4. Recent Cycle of U.S. Housing Production <ul><li>Excess demand drove unsustainable new residential development </li></ul><ul><li>Why the excess demand? </li></ul><ul><ul><li>Low interest rates increased affordability </li></ul></ul><ul><ul><li>Home value appreciation </li></ul></ul><ul><ul><li>Aggressive lending tactics in sub-prime market </li></ul></ul><ul><li>Market correction was expected to account for overproduction (400K to 600K units) </li></ul><ul><li>Not-so-soft landing </li></ul><ul><li>Correction taking longer than expected—fears of home value depreciation </li></ul><ul><li>??? Bottom out @ 1.2 million units in Q4 ’07 or Q1 ’08 ??? </li></ul>Sources: Census
  5. 5. New Residential Housing Permits Source: U.S. Census Bureau (through September 2007) 2007 2000 2002 2003 2004 2005 2006 2001
  6. 6. Source: U.S. Census Bureau (through August 2007)
  7. 7. 2007 Study: “Implications of the Soft Housing Market on Suppliers of Building Products” <ul><li>Objective: to gain understanding of the new industry environment </li></ul><ul><ul><ul><li>Changes in business and construction practices </li></ul></ul></ul><ul><ul><ul><li>Changes in relationships with suppliers, subcontractors, and homebuyers </li></ul></ul></ul><ul><ul><ul><li>Changes in attitudes towards trends, such as energy efficiency and “green building” </li></ul></ul></ul><ul><ul><ul><li>Changes in drivers of product specification and purchase </li></ul></ul></ul>
  8. 8. Study Methodology <ul><li>“ Discovery” phase through group discussions of 3 – 4 builders to understand scope of issues </li></ul><ul><ul><ul><li>Conducted by phone </li></ul></ul></ul><ul><ul><ul><li>Custom & production </li></ul></ul></ul><ul><ul><ul><li>Multi- and single-family </li></ul></ul></ul><ul><ul><ul><li>Wide geographic representation </li></ul></ul></ul><ul><li>“ Validation” phase through nationwide, representative survey of 320 builders </li></ul><ul><ul><ul><li>Results weighted by housing starts to achieve accurate picture of the market </li></ul></ul></ul>
  9. 9. Source: NAHB Research Center, Inc.
  10. 10. Source: NAHB Research Center, Inc. Share of respondents rating a 5 on a scale of 1 to 5
  11. 11. Share of respondents rating a 5 on a scale of 1 to 5
  12. 12. Share of respondents rating a 5 on a scale of 1 to 5
  13. 13. Implications <ul><li>Now is an outstanding time for a supplier to innovate—builders are more open to innovation </li></ul><ul><ul><li>West is most open, followed by the Midwest </li></ul></ul><ul><ul><li>Selling homes is getting the most attention </li></ul></ul><ul><li>Suppliers to production builders—consider approaches to help improve builder sales </li></ul><ul><ul><li>Customer-facing literature </li></ul></ul><ul><ul><li>Supply attention-getting web content </li></ul></ul><ul><ul><li>On-site demonstrations of products </li></ul></ul><ul><ul><li>Referral programs </li></ul></ul><ul><li>Suppliers to custom builders—consider… </li></ul><ul><ul><li>Opportunities to help builders better construct homes </li></ul></ul><ul><ul><li>This segment may be best initial target for new/innovative products—more open for enhancing their customer’s choice of alternatives </li></ul></ul>
  14. 14. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  15. 15. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  16. 16. Implications <ul><li>Production builders far more likely to use web to draw customers, use advertising </li></ul><ul><li>Custom builders more likely to focus on relationships with home buyers </li></ul><ul><li>Consider non-traditional ways to help builders: </li></ul><ul><ul><li>Generate referrals </li></ul></ul><ul><ul><li>Provide content for web sites </li></ul></ul><ul><ul><li>Generate web traffic </li></ul></ul><ul><ul><li>Help builders create more effective, sales-focused websites </li></ul></ul>
  17. 18. Source: NAHB Research Center, Inc.
  18. 19. Source: NAHB Research Center, Inc. Share of respondents rating a 5 on a 5 point scale
  19. 20. Source: NAHB Research Center, Inc. Share of respondents rating a 5 on a 5 point scale
  20. 21. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  21. 22. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  22. 23. Implications <ul><li>Capitalize on builder motivation to improve the efficiency and reliability of subcontractors. </li></ul><ul><li>May signal desire for products that: </li></ul><ul><ul><li>Are less prone to improper installation </li></ul></ul><ul><ul><li>Reduce labor cost by decreasing skill or time for installation </li></ul></ul><ul><ul><li>Reduce a builder’s reliance on subcontractors </li></ul></ul><ul><li>Greatest dissatisfaction with subcontractors in South (opportunity?) </li></ul>
  23. 24. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  24. 25. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  25. 26. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  26. 27. Implications <ul><li>Major trends supported by Baby Boom generation </li></ul><ul><ul><li>Energy efficiency = low energy cost on fixed incomes </li></ul></ul><ul><ul><li>Low maintenance </li></ul></ul><ul><ul><li>Design for aging in place </li></ul></ul><ul><li>Green building finished 4 th despite large amount of press it receives </li></ul>
  27. 28. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  28. 29. Share of respondents rating a 4 or 5 on a 5 point scale
  29. 30. Implications <ul><li>Top tier response benefits accrue: </li></ul><ul><ul><li>Directly to occupants, </li></ul></ul><ul><ul><li>In short time frame, and </li></ul></ul><ul><ul><li>Are easily measured </li></ul></ul><ul><li>Bottom tier responses benefits accrue: </li></ul><ul><ul><li>Indirectly to occupants </li></ul></ul><ul><ul><li>In an uncertain time frame, and </li></ul></ul><ul><ul><li>Are less easily measured </li></ul></ul><ul><li>Custom builders far more likely to favor bottom tier benefits </li></ul>
  30. 31. Source: NAHB Research Center, Inc.
  31. 32. Source: NAHB Research Center, Inc. Share of respondents rating a 4 or 5 on a 5 point scale
  32. 33. Residential Improvements and Repairs Expenditures Source: U.S. Department of Commerce Recession Source: U.S. Census Bureau
  33. 34. Source: NAHB Research Center, Inc.
  34. 35. Change in Size of New Single Family Homes Source: Annual Builder Practices Reports, NAHB Research Center, Inc. 3,620 2,363 1,631 2,420 2006 0% -2% -1% +2% Change 3,608 SFD Luxury 2,410 SFD Move-up 1,651 SFD Starter 2,382 Average SFD 2005
  35. 36. Change in Distribution of New Single Family Homes by Price-Point Source: Annual Builder Practices Reports, NAHB Research Center, Inc. 100% 100% 100% Total 21.6% 46.5% 31.9% 2006 +3% -1% -2% Change 18.3% Luxury 47.7% Move-up 34.0% Starter 2005
  36. 37. Kitchen Countertop Material Usage in New SFD Homes Source: Annual Builder Practices Reports, NAHB Research Center, Inc. +2% 3% 1% Other natural stone +9% 40% 31% Granite +2% 3% 1% Engineered stone 4% 36% 13% 2006 -4% -4% -4% Change 9% Ceramic Tile 40% Laminate 17% Solid Surfacing 2005
  37. 38. Exterior Finish Materials In New SFD Homes Source: Annual Builder Practices Reports, NAHB Research Center, Inc. -0.2% 14.2% 14.4% Fiber Cement -0.3% 22.7% 23.0% Vinyl 21.4% 7.4% 21.2% 2006 -2.8% +1.6% +0.3% Change 24.2% Stucco 5.7% Stone 20.8% Brick 2005
  38. 39. Share of New SFD Homes with Home Electronics Systems Source: Annual Builder Practices Reports, NAHB Research Center, Inc. 6% 10% 5% Built-in Home Theater 5% 4% 4% Whole-house Video Access 10% 10% 8% Whole-house Audio System 11% 12% 10% Monitored fire / toxic gas alarm system 1% 1% 1% Communicating Thermostat 2% 4% 2% Lighting control system 21% 19% 20% Monitored Security System 27% 24% 24% Non-Monitored Security System 3% 1% 7% 2005 2% 1% 5% 2006 2% Whole home automation 1% Video Entrance Phone 5% Intercom / Entrance Phone 2004
  39. 40. Share of New SFD Homes with Home Electronics Systems Source: Annual Builder Practices Reports, NAHB Research Center, Inc. 15% 4% 1% Built-in Home Theater 15% 2% 2% Whole-house Video Access 27% 7% 5% Whole-house Audio System 23% 9% 7% Monitored fire / toxic gas alarm system 2% 1% 1% Communicating Thermostat 6% 1% 1% Lighting control system 36% 20% 10% Monitored Security System 32% 31% 19% Non-Monitored Security System 1% 1% 5% Moveup 6% 4% 12% Luxury 1% Whole home automation 0% Video Entrance Phone 2% Intercom / Entrance Phone Starter
  40. 41. Price per Square Foot for U.S. Homes by Category Source: Annual Builder Practices Reports, NAHB Research Center, Inc. $190 $182 $160 Luxury $124 $104 $135 2005 $134 $108 $148 2006 $114 Moveup $101 Starter $124 All SFD Homes 2004
  41. 42. Shares of SFD Homes with Structured Wiring Source: Annual Builder Practices Reports, NAHB Research Center, Inc. 58% 61% 54% Luxury 46% 31% 42% 2005 46% 25% 41% 2006 38% Moveup 31% Starter 39% All SFD Homes 2004
  42. 43. Going Forward… <ul><li>“Soft Market” survey to be repeated in January, 2008 </li></ul><ul><li>Results to be reported in educational seminar @ IBS 2008 </li></ul><ul><li>Detailed data now available for 2007 study </li></ul>
  43. 44. Ed Hudson Director, Market Research Division NAHB Research Center 400 Prince George’s Blvd  Upper Marlboro, MD 20774 (toll-free) 800-638-8556  (fax) 301-430-6180 www.nahbrc.org

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