MoldMaking Technology

DEC 2018

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Page 42 of 50

INDUSTRY FOR MORE INFORMATION: Michael Guckes, Chief Economist, Gardner Intelligence / 41 PRESENTED BY Homeowners Drive Appliance Market More than Homebuyers Limited construction of new homes may affect demand for appliances in multiple ways. Those who pay attention to the housing market in 2018 have heard a lot of lackluster news. Stock indexes that track the hous- ing sector, like the iShares U.S. Home Construction ETF (ITB) and SPDR S&P Homebuilders ETF (XHB), have fallen over 30 percent between their first quarter 2018 highs and their valua- tions as this article goes to press. Equities analysts in this sector see unaffordable home prices, the rising costs for home building materials and rising interest rates as three of the most signifi- cant factors that restrict greater growth in the market. But, if they were to see price as merely a tool that balances supply with demand, and if they were to think about how limited supplies and strong demand can influence prices, then the picture of the market would look significantly different. On the supply side, U.S. New Housing Permits during the first three quarters of 2018 averaged 111,000 units monthly, which is the highest reading since 2007 and more than double the 2009 average. According to, the average U.S. home in September was on the market for 65 days, down 6 percent year-over-year. During the same time, prices were up 7 percent. However, in many non-rural markets, the median days on the market have been far fewer, while median home prices have grown much faster. In combination with the well-known fact that manufacturing and construction labor is in incredibly short supply, this data is one of the biggest reasons that the volume of new homes being constructed is not higher. This leaves a market in which people can sell their home eas- ily, but struggle to find another. This indicates that the market is not weak but rather is underserved significantly, which has two major implications for appliances. On one hand, the limited construction of new homes tamps demand for appliances going into new homes. On the other, these same conditions may entice current homeowners to upgrade appliances. A strong labor market and increasing wage growth support home improvements. In fact, data indicates that U.S. inflation-adjusted, resi- dential, fixed investment in home improve- ments has increased in the last four years ending in 2017, growing over 30 percent. Financial data from publicly traded firms in the home furnishings and fixtures market—as opposed to data from the hous- ing construction market—supports this underlying macroeconomic picture. Real revenue growth—calculated using a 12/12 rate of change at 4.7 percent—is slightly greater than the overall national growth rate. Furthermore, since early 2017, the home fixtures and furnishings market has increased capital expenditures growth at over 10 percent on a trailing 12-month basis, suggesting that the industry is seek- ing new ways to use technology to solve its labor shortage and one of its fundamental constraints in increased new-home con- struction levels. Appliance Industry Actual and Estimated Results 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 70 80 90 100 110 120 130 140 150 Trailing Twelve Months, Indexed to 2015=100 Capital Expenditures Earnings Revenues

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