Where the Builder Market Stands Now
From conversations I had during June Lightovation and from attending a homebuilders forum last week, there are changes happening in the housing market that electrical distributors need to know about.
First, let’s discuss Lightovation in Dallas. Despite a lighter than normal attendance, due to the FIFA World Cup matches in the area, the June show was an opportunity for distributors and manufacturers to discuss current business conditions.
One thing was clear: business is not the same as it was even six months ago at the January Lightovation show. Back then, the outlook was more optimistic — granted, this was one month prior to the start of the war in Iran. In January, Lightovation exhibitors and attendees were busy wrapping up projects from Q3 and Q4 and were anticipating a slow, but steady, year ahead.
In my conversations with manufacturers and distributors during June Lightovation, the most common word I heard to describe the business environment was “flat.” This was followed by many who said they were already down two and – more often –three percent from last year. One manufacturer I spoke with quipped, “We’re down three percent, which has pretty much become the new normal now.”
Part of that decline can be attributed to reduced discretionary spending as consumers combat the rising costs of food and fuel. Current homeowners are putting off moving plans because they don’t want a new mortgage at today’s higher interest rates. To goose demand, many builders – in all areas of the country – have been offering mortgage rate buydowns and other pricing incentives for some time in order move the needle on the number of homes sold. According to builders weighing in on last week’s BWG Global’s Homebuilders Industry Forum, those buydowns and incentives are happening less often.
On the Homebuilders Industry Forum call – with participants that included builders, general contractors, and materials suppliers – almost all areas of home building were seeing this stagnation. Professionals in the planned communities sector as well as single-family home construction and even luxury residential properties reported a slowdown over the past 18 months.
There is one area in new construction that is getting traction: the “affordable housing” category. With the passage of the 21st Century ROAD to Housing Act (which cleared its last hurdle and was signed into law on July 11), economic pundits predict measurable growth in the starter home market. In fact, some builders on the forum call noted that the process for obtaining construction permits on the local level has been much slower than in the past — unless it involved those magic words “affordable housing.” From major metroplexes to the suburbs, projects that addressed “affordable housing” were green-lit much faster than obtaining permits for typical single-family homes, even those on the high end.
Where do we go from here
As previously reported, the multifamily channel has been performing well for electrical distributors especially as certain areas of the country have experienced a population boost as major corporations in California and the Pacific Northwest, for example, began relocating to states offering corporate tax incentives and a lower cost of living (such as Texas, Florida, Ohio, West Virginia, among others).
Multifamily projects – especially for higher-income level, younger workers – boomed as large corporations needed to relocate their employees to areas where housing supply was more limited. Similarly, recent college graduates who landed good jobs, but weren’t able to afford a home (or perhaps are not ready to put down roots) gravitated toward upscale apartment and condo living.
With the very recent passage of the ROAD to Housing Act and its emphasis on affordability, the opportunities for lighting showrooms and electrical distributors center on scale and aesthetics.
Today’s starter homes and condos – which could qualify as “affordable housing” – tend to vary between 800 and 1,500 square feet, depending on the area and real estate resource.
As such, builders will be seeking lighting fixtures that are appropriately scaled to not take up a lot of room yet provide an ample amount of light.
Decorative solutions
At both January and June editions of Lightovation, many manufacturers expanded their assortment of wall-mounted fixtures (i.e. sconces) and offered more “convertible” designs that can look equally attractive as flush- and semi-flushmounts. As a flushmount, the fixture can hug an 8- or 9-foot ceiling for a more low-profile appearance. For ceilings with a bit more height, the semi-flush version can better fill the space visually. Here is another benefit that was pointed out to me: with the convertible design option, fixtures take up less room in a container, allowing manufacturers to maximize space on shipments.
The best news for future homeowners and townhouse/condo residents is that lighting manufacturers are actively addressing this increasing need for price-sensitive lighting without sacrificing aesthetics (which used to be the case). Look for this trend to continue as more projects begin filling the pipeline as a result of the passage of the 21st Century ROAD to Housing Act.
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