TRG | The Bottom Line – 6/3

The U.S. Census Bureau’s Construction Spending report was released this week. April’s Total Construction PIP was up 12.3% YOY lead by a sharp 18.2% increase in Residential spending. The data reflects consistent feedback from TRG industry contacts citing ongoing demand despite higher rates and prices. A decade of housing under-construction has created a massive shortage of housing…Texas has reported an historical low one-month supply of homes and land surveyors in Nashville are booked 5-6 months out. In our exaggerated hypothetical graph below, current demand could fall 50% and still far exceed homes for sale. Earnings releases from Home Depot and Lowe’s illustrate this theory as both companies reported fewer transactions but higher ticket size. As a huge flux of 30+ years old move into peak homebuying years (with incomes to support home purchases) we see ongoing demand and pricing power in our building products sector.