Trucks don't often carry entire houses. But a lot of trucks depend on homebuilding, furniture and furnishings, yard and garden supplies, and household goods moving. Thus, a lot of carriers should be keeping an eye on the housing market if they want to know how their business will fare. A variety of data sources provide clues about where housing is headed.
Building materials. Census Bureau reports on the value of construction spending, including new single- and multi-family dwellings and improvements, showed that all three categories were at least 12% ahead of their January-April 2004 totals. That suggests demand will remain strong for several more months for trucks to deliver building materials, and the raw materials that make up building supplies.
Forward-looking indicators suggest that the building boom will keep going even longer. First, the National Association of Home Builders said that both new-home builders and remodelers were still bullish about sales for the next six months. Second, a government report said building permits were at record levels. Most single-family housing takes six to nine months to build, and multi-family housing takes 10-13 months. Thus, building-materials haulers can be reasonably confident they'll be busy for the rest of 2005.
Household goods moving. If they build it, will buyers come? That's never a sure thing, but builders have several reasons to be optimistic. First, buyers have been snapping up houses. The ratios of unsold to just-sold new and existing homes have remained very low.
Meanwhile, the National Association of Realtors reported in early June that pending sales of existing homes — houses with a ratified sales contract that were awaiting settlement — were at an all-time high. In addition, the government said sales of new single-family homes also set a record in April. There are plenty of buyers getting ready to move, even if future sales should taper off.
So far, there has been no tapering off, let alone bursting of bubbles. House prices nationally appreciated at exactly the same rate, 2.2%, in the first quarter of 2005 as in the fourth quarter of 2004, according to a report from the Office of Federal Housing Enterprise Oversight.
In another sign that buyers will keep coming, the interest rate for new 30-yr. fixed-rate mortgages was lower in mid-June than at any time since the end of March 2004. The percentage of buyers using interest-only mortgages has been rising steadily. Such mortgages lower the monthly payment relative to a traditional amortizing mortgage that includes repayment of a portion of principal, along with interest, each month. The combination of falling rates and more interest-only borrowers means more people can afford monthly payments in spite of rapidly appreciating prices.
Furniture, furnishings, yard and garden supplies. There isn't a close correlation between housing indicators and demand for these products. But new-home sales are often quickly followed by purchases for the house and yard. Rising house prices mean that sellers have the means to invest more in decorating and landscaping. And falling mortgage interest rates encourage refinancing by homeowners who are not moving to spend on their house and yard. Lately, the share of mortgage money being used to refinance has been climbing. In other words, all signs — new- and existing-home sales, prices, and refinancing levels — are “go” for trucking companies serving these markets.
The bottom line: I've been forecasting a slowdown in housing for four years now, and I plan to stick with that forecast until it comes true. But for the rest of 2005, housing-related haulers should thrive, not dive.