Digging into housing data can unearth some truly astounding glimpses of what the residential market may look like in the future.
Electrical Wholesaling's November issue is always all about numbers. Over the past 30 years, the magazine's editors have published sales forecasts, multipliers, employment data, product mix percentages and other data intended to help readers plan for the future growth of their businesses. It's a massive task that puts the editors in close contact with thousands of data points as they develop the popular market planning tools that have become an industry benchmark for the magazine's readers. Sarah Tobaben Dolash, EW's managing editor, and Jan Rabinowitz, EW's senior research manager, have once again done a masterful job in compiling the forecasting tools you will find starting on page 12.
In the process of collecting this data, we came across some mind-blowing numbers that offer insight into some housing and construction trends sweeping the United States. With the residential market accounting for more than 27 percent of electrical distributor sales, according to EW's estimates, it's sure to be of interest.
Since 1998, at least 15 metropolitan statistical areas (MSAs) have each issued more than 100,000 building permits for single-family homes. Try to visualize 100,000 new homes. When I try to do it, I see endless cul-de-sacs snaking their way through what once was forest and fields, and a whole lot of stop-and-go traffic. Now take that vision and multiply it by three. You will then see how many new homes have been built in the Atlanta MSA, which since 1998 has issued 359,000 building permits for single-family homes, according to the National Association of Home Builders (NAHB), Washington, D.C. Sadly, that growth has come at a cost, as anyone who has ever been stuck in rush-hour traffic on Atlanta's Route 285 loop can attest.
However, that much home construction, and the related retail and commercial construction that follows residential development, provides a ton of electrical sales. Each one of those homes in the piney Georgia forests needed a load center, possibly 20 circuit breakers, several hundred feet of building wire, dozens of boxes, wiring devices and wall plates, and perhaps a state-of-the-art structured wiring system.
An estimated 25 percent of new condos built in the Miami market will be owned by investors who have no intention of ever living in those housing units. I heard that statistic from several economists who spoke at the NAHB 2006 Fall Construction Conference. I knew “condo mania” was going wild in Florida from folks in the electrical business who had doubled their money by quickly flipping condos and even building lots in the Sunshine State. But that number astounded me.
It all sounds too good to be true — and will be, once the bubble bursts, as it almost certainly will when too many investors decide to cash in at the same time, and drive down the prices of their investments. You will hear the howls of pain from Miami condo towers and the palm-shaded condo villas along the state's countless new golf communities.
Twenty years from now, a new home will cost our children 45 percent to 50 percent of their income. Do you get along with your kids? I hope so — they may be living with you for a while. According to a fascinating article published recently in the New York Times about luxury home builder Toll Brothers Inc., Horsham, Pa., your kids may very well have to continue to live with you until they are 40 years old because they can't afford the down payment on a new home. Bob Toll, chairman and CEO, believes the U.S. housing market will follow what's already happening in Great Britain, where home owners pay seven times their annual income for a home. In the United States, we currently pay 3.5 times our annual income. Those kind of numbers don't scare Toll or other large home builders. Toll Brothers controls enough land for nearly 80,000 new houses, and its competitors own even more land for future housing developments.
Although some people may file this type of anecdotal information in their “Nice, but not necessary” folder, I think these numbers reflect some long-term trends that will change how the electrical industry does business in the all-important residential market.