The Road Ahead

Your office space could become someone’s home; states like Arizona will experiment with modifying the weather; and the pandemic will continue its disruption. These are just some of the ideas and events that lie ahead according to our Director of Strategic Insights Sandy Embrescia-Hridel's 2022 predictions. Read ahead for the 10 trends he believes will impact the building materials industry in the coming months.

1. There will be meaningful increases in adaptive reuse of buildings

Converting under-utilized real estate assets (many in urban settings without much developable land) into residential buildings has picked up in the last few years and will gain more momentum this year. Adaptive reuse will be an important part of the strategy to address the nation's housing shortage. The range of possibilities is extensive, from hotels and commercial office buildings to parking garages and ghost malls. Conversions will add multi-family residences (including affordable housing), senior housing and homeless shelters.

2. We’ll see increased use of sustainable materials in development and production of building materials

Sustainability is increasingly important to home buyers and to the homeowners pursuing remodeling projects. An increasing percentage of these consumers cite sustainability as an important factor when considering a brand or product purchase. And the largest group of home buyers today, millennials, place greater importance on sustainability than other home buying generational cohorts.

3. Modular construction will become a widely accepted solution

Modular construction (constructing parts of a home off-site or in factories) will attract big investments that will be viewed as smart hedges against risk (rather than their previous reputation as an unproven investment). Modular and off-site production help address construction labor challenges, improve component/product quality, mitigate the risk of delays due to weather and offer solutions to other challenges of traditional construction processes. Factories will have specializations: those that serve standard, semi-custom and small developers, those that serve true custom home modular builders and those that serve traditional commercial modular builders. Investors and builders will be buying or building their own modular factories. The model (including the financials) has been proven out.

4. The home improvement/R&R market will be strong all year, finishing +8% ($) for the year

R&R spending has been hyper elevated for two years; while it’s not disappearing, growth is going too slow. Remodeling contractors have significant backlogs, but they’re not able to get through their projects for a variety of reasons, including lack of available materials. 2022 will be another year of strong R&R growth (in the high single digits or low double-digits) and growth of large projects will represent the largest portion of the increase.

5. Another year of double-digit home price appreciation

The last two years have produced incredible levels of home price appreciation driven by heightened demand and limited supply in an already under-supplied market. While Fed monetary policy (raising interest rates means higher mortgage rates) will cool home buying demand, it's still a sellers' market. Our outlook is that home price appreciation could achieve low double digit growth in 2022 as buyer interest continues to outpace new home construction and existing home supply on the market.

6. Top building materials manufacturers will establish highly resourced internal teams for disaster response

The frequency and destructiveness of natural disasters will continue to increase. Manufacturers/OEMs that can get the right products in place immediately following natural disasters will play a key role in helping affected people recover while also benefitting from revenue and share gains.

7. Supply chain challenges will NOT be resolved fully in 2022

A large part of that challenge will continue to be based on Asian imports and trans-Pacific shipments, but even OEMs and suppliers that rely on domestic supply chains are not immune from the supply chain hiccups that are continuing. Even in the absence of new variants (knock on wood) disrupting things, it will take all year for many producers to catch up on backlogs and achieve “normal” levels of production and shipments.

8. Production of vehicles will continue to be negatively impacted by chip shortages

New vehicle sales, both passenger and commercial, are a huge and critical part of the U.S. economy (and building materials/construction). And vehicle production disruptions due to semiconductor chip shortages are widespread. Production will continue to improve (especially in the second half of 2022) but many models of passenger vehicles, delivery trucks, OTR trucks, Ag machinery and RVs will be delayed significantly.

9. We’ll see a reversal (albeit a small one) of the pandemic baby-bust

A reversal (albeit a small one) of the pandemic baby-bust: U.S. childbirths in 2020 were 3.61 million, the lowest since 1979 when the U.S. population was 221 million (versus 331 million today). 2021 childbirths will be around 3.64 million. U.S. childbirths have been basically declining since 2007, when 4.32 million babies were born in the U.S. A big jump in births in 2022 is unlikely, but hopefully U.S. childbirths will make up some of the estimated 60,000 that normally would have happened but didn’t occur due to the pandemic.

10. States in the Mountain-west and Southwest will expand experimentation with weather modification

Colorado, Utah, Wyoming, Nevada, New Mexico, Arizona and California will increase their ongoing experimentation with cloud seeding/weather modification as one important strategy for combatting severe drought. Much of the experimentation will take place in the upper Colorado River Basin and the resulting increased riverflows benefit the participating states. Why does it matter? Because people continue to move to areas that don’t have enough water and/or are wildfire-prone areas (it’s estimated that now half of the population in the U.S. west lives in wildfire-prone areas). Cloud seeding will not solve the megadrought or end disastrous wildfires but can help by bringing more water to drought-stricken areas.

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