Projected market growth for next year bodes well for concrete producers.
This time of the year, we see reams of stories and predictions on all manner of statistics that affect the construction industry, and implicitly, the impact that should have on concrete producers across the country in 2018. I have always felt that housing construction, particularly new single home starts, play a bigger role in concrete consumption than is often acknowledged by construction industry economists and others. A case in point was the start of the last recession; total ready mixed concrete consumption fell from the 2006 high of 457 million cubic yards to 414 million cubic yards in 2007, a 40 million cubic yard-plus drop in a single year. This was the single largest contraction year-over-year that had ever been recorded since the industry started tracking annual production yardages in the mid-70s. And the analysts who drilled down deep to find out why came up with a startling answer: almost all of that plunge was attributable to the dramatic housing slowdowns in Florida, Southern California, Phoenix, and Las Vegas, which wound up being the four ‘Ground Zeros’ for the housing bust that followed immediately thereafter.
Well, now the National Association of Realtors has issued their predictions for the hottest housing markets of 2018, and not surprisingly, several are the same boom markets that experienced huge run-ups in the mid-2000s. I guess the old adage that “memories are short” rings true, even while the Great Recession is still in the rearview mirror in many housing markets.
The report did impose some interesting criteria in selecting their Top 10 Markets for 2018. It included only those hot markets where affordability was a key measure; in addition, the certainty for home appreciation, coupled with robust local economies and job growth all came into play in making their predictions. And most importantly was the quality-of-life question: which markets are the ones where people actually want to live?
With only the exceptions of Lakeland and Deltona, Florida, and Stockton, California, small markets by any measure, the rest would be characterized as medium-side to large markets. But the above three cities are very close to Tampa, Orlando, and the San Francisco Bay Area, all markets where housing is hot, and affordability is becoming an issue. The rest are many of the obvious cities that have been touted as hot housing spots for years now: Charlotte, Nashville, Dallas, and Salt Lake City top the four big markets, as well as Tulsa and Colorado Springs, which round out the medium-size cities. And one large market does not surprise – Las Vegas. The poster child for the Big Housing Bust has come full circle, and is now predicted to grow by 4.9% next year, with a predicted price appreciation of 6.9%. Many financial institutions bought up thousands of houses during the trough of the economic bust there, and are profiting handsomely as the market reignites and people flock back to the weather and affordable lifestyle Las Vegas offers.
There are many other markets on our own radar that we think have much promise, so I’ll bet there are 50 or more in total that will show robust price appreciation and market growth in 2018. It should be great for concrete production.
About the Author
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on Twitter – @allenvillere.