Housing Crisis Impacts Paint Makers

By Tim Wright | February 15, 2008

It is no surprise that the U.S. housing market is going through a severe slowdown, with a sharp rise in mortgage defaults. The subprime mess and $100/barrel oil prices have been a one-two combination blow against the U.S. economy during much of 2007.

The U.S. Commerce Department said housing starts fell 14% to an annual rate of 1.006 million in December, the weakest showing since May 1991.

For the 2007 full-year, housing starts plunged by a whopping 24.8% from 2006, the steepest decline since 1980.

Building permits, seen as a measure of future construction plans, fell 8.1% in December to an annual rate of 1.068 million, their lowest level since March 1993.

For the entire year, building permits dropped by 25.2% in 2007, the sharpest falloff in the gauge of future activity since 1980.

The nation's housing crisis has now emerged as a key issue in the race for the White House.

Democratic Presidential candidate Hillary Clinton is running an ad in which she spotlights the crisis, which has led to widespread foreclosures and increased fears of recession.

As the Presidential campaign continues, the housing crisis may become even more of an issue. Public opinion polls indicate that the war in Iraq is becoming less of a top issue for Americans, while domestic problems are gaining more prominence.

As new home sales and new construction slows, obviously it factors into the health of the paint and coatings market. With less paintable surfaces available for finishing, bottom line's will be impacted.

Analysts predict that the housing market will not recover any time soon. In addition, continued conflict in the Middle East will likely keep oil prices hovering around the current $100/barrel range.

On top of this, environmental restrictions continue to get tighter. Building on the Ozone Transport Commission's low VOC paint regulations in 2005, further regulations went into effect in certain areas of northern Virginia in January. In May of this year, Connecticut will enact its own Architectural Industrial Maintenance (AIM) regulations, restricting non-low VOC paints. Massachusetts will enact its AIM regulations in January 2009.

With all of these issues to contend with, 2008 is going to be a challenging year for paint makers. Being asked to innovate new products that are convenient, high-performing and healthier for consumers with less money in their wallets is not easy.

Tim Wright