Are You Getting Busy?

There’s evidence housing starts are on the rebound. Will that translate into more work – and new equipment – for your installing business?

I was at a local government meeting in my hometown a while back where we learned a glut of developable single family home lots a few years ago has disappeared, leaving a shortage of attractive building sites. Speculation was that subdivision developers, dormant following the housing crisis of 2008, were starting to consider paving new roads through long-neglected farm fields on the edge of town.

It was a surprising and uplifting report for most folks in the room.

A turn-around in home building fortunes is inevitable as young people start families and populations shift and grow. You don’t have to search too far to find headlines predicting that the housing market is back on an upswing this year. While experts warn not to expect the exuberant market of the first half of the 2000s, they say a modest, steady climb in housing starts is in the offing.

MILLION HOME MARCH

According to the Dodge Outlook Report from McGraw-Hill Construction, single-family home construction will advance by 615,000 units in the U.S. this year, multi-family housing units will be up 14 percent, and commercial building will grow by 12 percent. The numbers will be well below their peak before the economic bubble burst, but positive nonetheless.

An article in Forbes magazine said that under-building in recent years will provide the greatest impetus for the housing recovery. Contributing writer Bill Conerly predicted more than 1 million housing starts this year, but even that figure is modest compared to the 1.5 million new units he argued are needed annually just to keep up with factors including population growth, demolition of old housing and demand for vacation homes.

For installers, this might be the good news you were waiting for after several years of sluggish recovery. After housing starts fell off a cliff almost five years ago, I heard reports from contractors who had to cut staff, enact creative belt-tightening measures, and sell off some equipment to blunt the impact of lost revenues.

But I’m hearing a little more optimism from contractors these days. And so, apparently, has the Equipment Leasing and Financing Association, which recently released a forecast for 2013 that says equipment sales will be on the rise. Among other things, the report recognizes a pent-up demand for new equipment in construction-related industries. And the ELFA says that demand is being met with continuing favorable credit conditions to finance new equipment.

UPGRADE TIME?

The association’s equipment acquisition trends list got me to wondering if more Installer readers are preparing to pull the trigger on a new mini excavator, dump truck or other equipment as they head into the busy season.

Many of you have maintained a conservative approach to big capital investments in recent years, and with good reason. Avoiding debt may have been the biggest self-preservation move for small businesses since the housing bubble burst. With little revenue coming in, you put off new equipment purchases and turned to careful maintenance of older equipment to get by.

But as the work starts coming back, will that old equipment keep your crews moving at a brisk pace? When you start having to work sun-up to sundown this summer – and there’s no wiggle room in the schedule to handle a breakdown – can you afford to keep running equipment with questionable reliability? Do you run the risk of alienating customers and losing future work if an older machine puts you behind schedule?

Then there’s the ideal convergence of pent-up demand meeting favorable borrowing terms. If you can secure credit for a needed new machine, is now the time to take the plunge? According to the ELFA, “businesses will generally find an improving credit supply as they consider equipment acquisitions.” They predict equipment investment will pick up in the second half of this year and that an improving housing sector will help.

YOUR STORY

I want to hear your outlook for the remainder of 2013. My hope is that you’re able to schedule out at least a few months in advance with new system or replacement installations this summer. Maybe you’ve already been able to book out most of the year and are looking to add new members to your team. Perhaps the workload justifies replacing that tired old excavator or the work truck with too many miles on the odometer.

You can share your story with me by emailing me at editor@onsiteinstaller.com. I’ll compile your responses and share them with readers as our own industry-specific business forecast.



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