For a capitalist society that relies on the free play of supply and demand, the largest recession in a hundred years was bound to throw things out of whack. And for the owners and managers of building materials lots, it certainly did.

There are a few clues as to where demand will land in the coming year, and, thankfully, we’re probably looking at a relatively stable recovery.

We believe that because in all our years of research we’ve never before seen an exclamation point in a Federal Reserve paper. But here it is:

“The returns fell during the Great Recession, as they typically do in recessions. However, the returns quickly rebounded and are now as high as they have been over the past three decades!”

Here’s the chart that caused it:

The construction market has come back to life, but it’s still a little out of whack.

Fundamental Shift to Home Building…

The recession drove down the nation’s home ownership rate to its lowest point in forty-eight years when it bottomed out at 63.5% earlier this year.

Demand has finally begun to recover. In the second quarter home prices rose in 163 out of 176 metro areas. That will probably keep happening, because construction companies basically stopped building houses six years ago. So, right now, there’s no supply to meet rising demand.

In fact, some cities – especially those spanning the coast from Florida to North Carolina – have seen bidding wars return as newly-confident buyers scramble to lock in low mortgage rates. Florida is really on a tear, with single-family home sales up 19% over last year.  And CrossCheck’s home state of California continues to amaze everyone; demand has driven the median price of a home in “Silicon Valley” to nearly a million dollars.

Your builders are happily scrambling to handle this. In fact, the National Association of Home Builder’s confidence index hit 61 this month, the highest it’s been since 2005. They pushed housing starts to a 12.8% jump in July, which again is the highest level since before the recession. And they’re slacking off the apartment building craze that sustained them through the recession. Starts for multifamily buildings fell 17%.

…And Away from Multi-family

Condominium construction has also lagged, but analysts attribute that more to legal issues than supply and demand. FHA restrictions on condo loans make them less attractive, for one thing, and builders need to take on a greater level of risk when building them. Nevertheless, Millennials and now senior Boomers all want to live in urban areas, so as they drive up rents they’ll eventually make owning a condo attractive again. Just probably not this year.

Speaking of senior Boomers, 9,600 of them turn 65 every day. One would think that would create a steady demand for senior housing, but it isn’t happening. Senior housing is probably the only sector that’s overbuilt right now, and occupancy rates in thirty-one major markets have fallen for two consecutive quarters so far. Stock prices for REITs focused on this market have fallen ten to twenty percent.

Millennials, on the other hand, have started to show up – with their kids – to buy small new homes. Smaller than before, anyway; the median size of a new home has dropped 40 square feet, or about the size of a walk-in closet. People moving from an apartment probably won’t notice, and analysts expect first-time buyers to account for 18% of new-home sales this year. That’s a good start, but before the recession they made up a quarter or more of all new-home sales. The Millennials really got hammered in this recession.

Solving Problems to Increase Sales

So if we can expect an uptick in demand for new home construction materials, next we’d want to wonder how contemporary designs might affect that demand.

One trend has to do with entryways and hallways. The “foyer” as the British used to call it, has started to merit attention. People want to use the space as a den for entertaining, and the architecture and appointments need to reflect that. Solve this problem for your builder before he arrives, and you might be able to add high-margin design elements to his purchase.

We already know that new homes are missing a closet, so to speak, so it probably makes sense that when the Wall Street Journal polled designers on Houzz.com, 46% of them said hallways were often “overlooked.” The real trick with hallways, they say, is to find artful ways to install storage – another problem you can solve proactively and boost sales.

It’s “GREEN”

And let’s not forget how conscientious Millennial shoppers have become. They care about everything from how the raw materials in their building supplies were originally created to how well you treat your employees. The more you can tell your builder about these things, the easier it will be for him to come up with compelling marketing materials for his Millennial buyer.

Interestingly, they want you to call them “green,” not “environmentalists.” In the Millennials’ world, that antique word from the seventies has become associated with narrow-mindedness.

LEED gets that already, and they consistently call the materials they rate “green building materials.” The market was worth $40 billion in 2013, exploded nearly ten percent to $43.8 billion the next year, and is expected to continue at a compounded annual growth rate of 9.5% at least through the end of the decade.

So, the construction industry has quite a few bright spots indicating where your sales will be this year and next. To focus on business development, be sure you can close all the sales that come your way, and that you can do it without undue risk.

We can help you there. To boost your green credentials we can provide you with free loaner equipment for your Remote Deposit Capture service, which allows you to deposit checks right from your office, eliminating wasted time and fuel going to the bank. Many of our building materials customers love our COD service as well, which lets you guarantee a check payment even if your customer changes their order at the last second. And of course, the main reason we’ve been in business for thirty years is that we have the best customer support in the industry. Bring us on as a partner today.