May 30, 2012 | By Joe Radcliff |
MaxCon is now forecasting a breakout upturn in housing starts reversing a four-year sideways
- Based on our analysis we’re forecasting that housing starts will follow the May 2012 upside breakout in builder confidence as calculated by the NAHB.
- The net forecast: In Q3 2012, housing starts will begin a strong upside trend, taking US housing starts to the 800,000 to 900,000 in the October-November target time frame.
Implications for Residential Contractors:
- Prepare now for upturn with infrastructure investment (systems, marketing, software, etc)
- Maintaining or increasing market share will go to those who prepare now so that resources are in place when growth spurt occurs in the 3-6 month target.
Details and Background:
The National Association of Home Builders [NAHB] publishes monthly its measure of builder confidence. Based on a survey of builders nationwide, the Housing Market Index [HMI] tracks the ups and downs of how builders see the prospects in the coming months. Using several survey questions, they’ve developed a formula to calculate the HMI; it can range from between 0 and 100.
Why is the Housing Market Index important to contractors?
- Based on the analysis we’ve done at MaxCon Construction Management Software, we’ve found that this HMI index of builder confidence usually leads actual housing starts by three to six months.
- It’s housing starts that we’re all interested in because it reflects the real status of the residential construction market. The higher housing starts, the better business is overall. We recognize that when housing starts drops, the remodel, refurbish, and repair business can get stronger; but overall the more residential new construction starts, the better it is for contractors of all types: home builders, roofers, decks and fencing, siding and other specialty construction companies.
What it means for contractor business investment and growth plans.
Simply put, if we can predict an upturn in the builder economy, contractors can have greater confidence that investments in growth will have a real payoff. For those contractors that can get organized for growth in the economy faster than competitors, you’ll have a leg up in building your market share. We’re talking about investments in marketing, and construction company infrastructure such as SaaS CRM software.
Here’s our summary forecast chart based on the May 2012 HMI results.