Market Snapshot: Building & construction 5909

As of this writing in late August, a burning question remains in the minds of financial gurus, investors, and homeowners alike: When will the real estate bubble burst? Most experts are hesitant to call it, but in a third quarter report, economists Michael Englund and Rick MacDonald of Action Economics said that they expect 2005 will likely mark the peak in the housing sector. Hedging their bets, though, in the same report (see the Aug. 24, 2005 issue of Business Week), the pair also maintained that the bubble may not pop until 2006 or 2007.As real estate goes, so goes the IM market for building and construction, and the upswing has been on for some time now. A U.S. Dept. of Commerce report released in late August showed that new home sales rose 6.5% between June and July 2005, posting a 27.7% gain from a year earlier. The number of homes for sale also climbed, with a 1.8% rise from June and a 15% annual increase.Shortly before the government issued its report, the National Assn. of Realtors presented figures for sales of existing U.S. homes and reported a 2.6% drop in July, reflecting a slowdown in condominium and single-family home purchases in most regions of the country. Economists saw this as a typical seasonal cooling off, however.Riding the WaveWith all of the economic activity in this market, it’s no wonder that IM products are surging ahead as well. In its industry study, “Siding to 2008,” market research firm Freedonia Group (Cleveland, OH) predicts an increase in demand for polypropylene siding and shake products (also called MPS for molded polypropylene siding) of 8.4% per year to 1.2 million squares in 2008. Growth in demand is expected to come from a healthy repair-and-remodel segment of the market, and will be aided by a rising tide of suppliers, according to the report.Another plus for IM siding and shake may come from a growing interest in green building techniques. Traditional extruded PVC siding is now seen as an environmental hazard by some builders eager to market their homes as eco-friendly.

Polypropylene siding is manufactured from a modified UV-stabilized polypropylene copolymer, also known as reinforced TPO. Molded to resemble natural cedar, it can be found in forms from lap siding to scalloped or straight edge shake shingles. In terms of performance, polypropylene siding is comparable to vinyl, but can be up to two times thicker and is aesthetically closer to the appearance of wood.One of the leading MPS suppliers, Nailite International (Miami, FL), replicates cedar shake panels and brick and hand-cut stone at its plant, which is more than 100,000 sq ft. Howard Wasserman, president, believes that this segment of the market will get a boost from cost-conscious builders and homeowners. “In material costs alone, real cedar is 50% to 100% higher, and it carries no warranty. Our products do,” he says. “In addition, we can mold in interlocking features for added strength and faster installation.”Another MPS producer, Atlantis Building Products (a division of processor Atlantis Plastics), offers a proprietary line of siding in eight colors called Cedarway, complete with traditional shake, scalloped, and hand-split styles. According to a company press release, the division was officially launched in 1998. Atlantis, through a private label program, also produces siding for building product suppliers and offers custom color matching.Plastic roofing demand should rise 4% annually through 2008, according to Freedonia, motivated by new construction spending for nonresidential building segments such as office, commercial, and industrial. In 2003, these markets represented 94% of the demand for plastic roofing.Residential applications, while starting from an extremely small base, are predicted to grow rapidly in the next three years. Formerly restricted to residential structures with low-slope roofs (i.e., multiunit residences), newer molded tiles, shingles, and shakes are now available for use on steep-slope roofs.