01.07.2019

Residential construction activity in early 2021 has continued where 2020 left off with robust demand growth. With strong order books, long lead-times and favorable fundamentals, many manufacturers continue to be more concerned about supply chain issues than demand for the coming year.

While questions have started to emerge around the sustainability of such strong growth, with mortgage rates starting to climb back up from record lows, the current consensus forecast for housing starts in 2021 is just over 1.5 million. This is an 11 percent increase over 2020 driven by single family growth of 18 percent. Despite rising prices and affordability, the consensus forecast for existing home sales of 6.3 million is 11 percent ahead of 2020.

Ducker’s Building & Construction team sees five key developments through the backdrop of positive market demand drivers and strong past year company financials, incorporated into strategies for building product suppliers in 2021:

Digital Reigns

    • Manufacturers are investing in virtual product showrooms and innovative digital tools to help customers visualize products and applications
    • Home centers have upgraded their digital strategies to compete with Amazon and further drive online sales

Ongoing Labor Shortages

      • Skilled labor shortage accentuated by the pandemic, with further workforce withdrawals and increased worker safety net
      • Extended lead times for more labor-intensive value-add building products, including windows and cabinets

Development of New Business Models

    • Growth of asset-light models for direct-to-consumer imported product categories, winning with e-commerce with the flexibility to serve more fragmented geographies
    • Products as a service; creating new revenue stream from service offerings as an extension of traditional product offerings

Sustainability and Environmental Drivers

    • New administration’s prioritization of reducing carbon emissions to renew initiatives for energy efficiency products and programs, such as home weatherization
    • Increased focus on recycling and sustainability, with novel ways to leverage business advantage and corporate citizenship

Pricing Dynamics

    • Lumber pricing appreciation of 50%+ negative impact on framing and new housing costs
    • Many product categories that increased prices in 2020 are returning with further increases in early 2021, with domestic pricing supported by challenges for imports.

Ducker’s Building & Construction team is at the forefront of key trends impacting the industry. Visit our Insights page for the latest insights and implications for global business, or contact us to connect with a team member.