Industry News
Windows Reveal the True Housing Market
5 years, 5 months ago Posted in: Industry News 0

By Robbie Whelan SOURCE: The Wall Street Journal

02/10/2012 — ORLANDO — Maybe the clearest way to look at the housing market is through a nice glass window.

Susan Marvin, president of Marvin Windows and Doors, a small, privately held family company based in Warroad, Minn., wants to believe that the housing market is improving, but the numbers say otherwise.

Housing starts and permits are at or near all-time lows. So are new-home sales. Existing-home sales, while improving, remain at near-historic lows. These are the reasons why Ms. Marvin’s company projects that 2012 will be a flat year for the window business, no better than last year.

“I don’t see one metric that suggests we’re at the beginning of a recovery. I see all the facts, and I go, ‘This all adds up to a very bad year,” for 2012, she said Thursday over coffee at the NAHB’s International Builders Show in Orlando.

Marvin’s glum projections are in line with much of the housing industry at large, but in a way are more troubling because they show that even companies that focus on remodeling have a negative outlook. That’s disheartening because recent estimates show that while new-home sales and starts hit record lows in 2011, dollars spent on remodeling are rising for the first time since 2006.

Still, despite the boost in renovation work, and some signs of uptick from the dealer and distributor communities, Marvin is predicting little to no growth in revenues for 2012. Best case scenario, Ms. Marvin says, the company’s orders will rise 5%, but even that is unlikely.

“Dealers who last year sold two house packages might sell four this year, but it needs to get back to 12. We’re still so far from the housing industry of five years ago,” she says.

The company was started in 1904 by Ms. Marvin’s grandfather, and was originally a lumber yard. At the outset of World War II, the family decided to expand to window production as a way of diversifying and ensuring jobs for the family when they returned from military service. Today, more than 2,000 people work in the company’s flagship factory in Warroad (more than the town’s population of 1,700) and Marvin operates 10 factories in the U.S., mostly in the Midwest.

During a typical year, about half of Marvin’s residential business is from new construction, and half is from repair and renovation work. But that balance shifted starting in 2009. Now Marvin makes three-fourths of its residential real-estate revenues from repairs and renovation, and only a quarter from new construction.

The window business is highly cyclical, and depends heavily on both new construction of homes and on the availability of consumer credit for homeowners to remodel their houses. For Marvin, sales pick up in April, when a lot of new homes begin construction.

But the housing crash hit suppliers like Marvin hard. Unit orders are down by more than 20% from their peak about five years ago, Ms. Marvin says. As a private company, Marvin does not reveal sales figures or revenues, but trade publications have estimated the company’s annual revenues at between $500 million and $1 billion, a range that Marvin confirms is accurate.

Since 2009, the window maker has shifted from a 40-hour work week to 32 at many of its plants, cut executive pay and 401(k) contributions, but has not laid off any of its 4,300 workers, Ms. Marvin says. Even so, Ms. Marvin isn’t holding out too much hope for 2012.

“We’re not talking about a housing recovery,” she says. “We’re talking about a small pickup.”

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