The U.S. residential housing industry is one of the most diverse and most important industries within the U.S. economy. The health of the housing industry depends on the number of homes built and the make-up of the builders at the regional and local levels of the market. A healthy housing market is one that meets the needs of the homebuyers and the economy, which include affordability, diversity, and choice. Meeting those needs, in turn, drives investments in innovation by manufacturers. The Mid-Tier Builders, represented by builders that build between 50 and 2,000 homes per year, is the key competitive element that drives this cycle.

Currently, manufacturers are giving the large national public builders a great deal of attention, given they are poised to grow quickly over the next few years as the housing market gets back on its feet. However, manufacturers, and the industry as a whole, should not lose sight of the importance of the Mid-Tier Builders. Collectively, the Mid-Tier Builders represent about half of the homes built in the country. These builders are also often times leaders in their local markets. The current market conditions may be stacked more in the favor of the large national builders, but the Mid-Tier Builders are made up of entrepreneurs who don't settle for market conditions, they adapt to them. Now is the time when Mid-Tier Builders need the support of the manufacturers the most, and the time when manufacturers can establish long-lasting relationships. 

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Cleveland Research has completed a 40-page homebuilder industry initiation report including unique data and industry analysis and their thoughts on the pace and shape of the recovery from here. The complete report is available to Builder Partnerships members.

Bottom line, we have a positive outlook for the homebuilder industry driven by the potential for 15% annual single-family growth through 2017 and continued price increase traction. 

Key Points

1. The road to recovery in the builder industry looks to be a relatively attractive one (starts are 40% below normal demand) and low housing inventory suggest some periods of unusually strong growth are possible (three years of 20% growth would put single family starts just back to the historic average). Mixed first-time buyer demand (30%+ of the market today) and tight credit likely limit this level of growth to an upside scenario at this time.
2. Our outlook for industry volume is reasonably positive: single-family starts can return to the 1mm level in 2017 (roughly 15% average annual growth, 1.4-1.5mm total starts).
3. Price progress looks set to continue for the builders in the near-term. Our work suggests builders continue to raise prices and plan to do so through 2014. This should net to gross margin gains/upside earnings over the next 1-2 years.
4. The large public builders look poised to grow ahead of the market through this recovery. The key piece of this is a stronger land position (moved early versus small builders). Tight labor and still tight land development lending also support large builder market share gains.

 Read more of the summary here...

Cleveland Research Company residential building industry reports are available exclusively to Builder Partnerships members.  Members can access the Q1 2014 Housing Market Update report by clicking on the following link:

 Builder Partnerships members can access the full report here.

Builder Partnerships is pleased to announce the addition of Royal Building Products into our program.

Royal Building Products is a leading manufacturer and distributor of building materials for the home remodeling and new construction markets. For more than 40 years, the company's commitment to quality, innovation and customer relationships has attracted the loyalty of a growing number of building professionals, homeowners, architects, engineers and distributors to its products. 

From traditional vinyl and insulated siding, to shake and shingles, to trim, moulding, decking and exteriors accessories and accents, Royal designs products that deliver on the most critical professional and homeowner demands: stylish, sustainable products that boost curb appeal and are easy-to-maintain. Royal's "Build Bold" mission is a commitment to bringing a new and distinct energy and attitude to the way the company works, the way it makes products and the way the company brings those products to market.

As exterior design experts, Royal also equips pros and homeowners with interactive tools that assist in choosing the right combination of colors, lines and textures to create unique architectural styles and exterior designs.

Royal Building Products provides unsurpassed customer service to support the reputation of building professionals. Royal's responsive sales team understands every aspect of home exteriors, helping builders nail every siding project with quick order turnaround and installation support.

To learn more about Royal Building Products, please visit www.royalbuildingproducts.com.