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    economic factors affecting the building products industry

    Debt and Other Economic Factors Affecting the Building Product Industry

    Some things don’t change, such as the importance of building products CMOs staying attentive to the economy as they make long-term strategic marketing plans. This is, in part, why we’re revisiting the factors CMOs should scrutinize as they plan for the remainder of 2024.

    We’ve Seen A Version of This Plot Before

    The last time we went deep on this topic, consumer debt was decreasing, as well as mortgage debt, but (spoiler alert!) not today. If a CMO hasn’t looked up recently and considered the economy, he or she could easily make marketing plans that disconnect from key audiences.

    One marketing strategy is to just do a 180-turn on everything done when the economy was humming along, but that seems a little too casual of an approach. Let’s look at the economic factors that affect the building products industry and how they might affect current marketing efforts.

    Consumer Debt on the Rise

    Consumer debt hit a record $16.9 trillion by the end of last year, which is an increase of $394 billion, or 2.4%, from the prior three-month period, according to the Federal Reserve’s Quarterly Report on Household Debt and Credit released in February. Most debt is connected to mortgages, but credit card balances and delinquencies showed they were on the upswing also. According to the report, credit card balances increased nearly 6.6% to $986 billion during the quarter, the highest quarterly growth on record, based on New York Fed data going back to 1999.

    Despite the Federal Reserve’s series of rate hikes since last year, increasing interest rates burdened the housing sector, as mortgage originations dropped to 2019 levels during the fourth quarter of last year, according to the New York Fed report. Add to consumer debt the initial fears of a crisis in the banking sector when several U.S. banks stumbled before the Fed initiated a broad emergency lending program and it’s a mess.

    But Wait, There’s More

    All this debt and (near) destruction is relevant for the building products industry as the primary debt increase was in mortgage balances. But, just when we thought rates would skyrocket toward the 20-year high they hit in 2022, the market underwent a slight downturn. Mortgage rates fell in late March, after five consecutive weeks when they increased. The 30-year, fixed-rate mortgage averaged 6.42% for the week ending March 23, down from 6.60% the week prior, according to Freddie Mac. According to multiple financial advisors, “housing market watchers are holding out hope that interest rates already hit their peak last year.”

    The economic rollercoaster ride affects the building products industry because wary consumers tend to make fewer home restoration or new-build plans. On the other hand, according to an article in BuildersFirstSource, “A single-family home is in its ‘prime remodel years’ when it’s between 20 – 39 years old, and recent data show more and more homes falling into that category with every passing year, and that’s a trend that’s expected to continue for the foreseeable future.” If the numbers indicate thousands of homes are in their “prime,” their owners may choose to fix them, rather than sell them.

    Making sure your consumer-facing sales team is aware of the mixed messaging that’s inundating consumers, and the resulting price and debt caution, can help your team members understand the customers and how best to sell to them without pushing them further into debt—and to have an intelligent conversation about investing in a home and remodeling.

    For a snapshot of housing trends, the Drywall Finishing Council has a set of documents with the leading economic indicators that affect the construction industry for download or just reference. Although the statistics originate with the U.S. Census Bureau, having them on the council’s site provides context.

    Use Predictive Models

    Historical data, combined with economic markers such as consumer and mortgage debt, can be used to create predictive models that show how different scenarios your business faces can serve as a springboard to develop relevant marketing strategies and tactics to use in various economic circumstances.

    If rising prices in stone veneer, deck materials or plywood, or supply issues in glass are impacting your business, you might need to consider a pull back on discounting, or move your marketing goal to emphasize your company’s sustainability or origin story.

    Remember also that aggregate economic changes can alter your audience’s pain points, which means you may still motivate them to part with their dollars, but your messaging must be more narrowly focused, or change in tone or cadence. 

    For example, homeowners whom you might have considered aspirational and expansive in their home vision when interest rates were lower may now be more attuned to the price or scope of a project. You may not sell a complete remodel vision, but that bathroom tile could still get replaced. Refreshing an existing segmentation based on what’s happening in the current economic market is a key strategy. According to MarketWatch, the Global Building Products market is anticipated to rise at a considerable rate between 2022 and 2029, so consumer debt must be reconciled with such a prediction.

    Marketers in the building products industry can excel if they always keep one eye on the aggregate economic indicators when planning their strategies to promote and sell. Stay tuned. This plot could change again.


    FAQs

    Why is it important for CMOs to consider the economy when making marketing plans?

    Considering the economy helps CMOs avoid disconnecting from key audiences and ensure their marketing plans align with the current economic conditions.

    How has consumer debt changed recently?

    Consumer debt has been on the rise, reaching a record $16.9 trillion by the end of last year, with increases in mortgage debt as well as credit card balances and delinquencies.

    How have interest rates affected the housing sector?

    Increasing interest rates have burdened the housing sector, leading to a drop in mortgage originations and impacting consumer behavior in home restoration or new-build plans.

    Why is the building products industry affected by consumer debt and economic fluctuations?

    The building products industry is impacted by consumer debt, particularly in mortgage balances, as it influences consumer spending on home-related projects and renovations.

    How can marketers adapt to changing economic circumstances?

    Marketers can use predictive models and historical data to develop relevant marketing strategies, adjusting their messaging, emphasizing sustainability or origin stories, and understanding their audience’s changing pain points.

    What should marketers consider when the economy changes?

    Marketers should refresh their segmentation based on the current economic market, understanding that consumer priorities and preferences may shift, and adapt their messaging, tone, and cadence accordingly.

    How can marketers in the building products industry excel?

    Marketers in the building products industry can excel by continuously monitoring aggregate economic indicators and aligning their strategies to promote and sell products effectively in response to changing economic conditions.

    About The Author

    Elton Mayfield

    Elton's career spans media, production, digital and building industry expertise. His diverse experience makes him nimble, innovative, and curious – always pushing the envelope to create extraordinary work that delivers real results for our clients.

    2 thoughts on “Debt and Other Economic Factors Affecting the Building Product Industry”

    1. Pingback: Aging In Place Building Products and Home Ownership Rates « Depth Finder

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