DURING THE 2004–2005 housing boom, the U.S. home building industry operated at an unsustainable level. Double-digit annual appreciation rates of homes drew investors into the market, increasing demand and fueling overproduction. Throughout this period, housing industry experts maintained that a necessary market correction to more moderate levels would occur.

Seeing these factors in play, the NAHB Research Center initiated a robust study in late 2006 to explore not only the potential challenges ahead, but also how builder expectations for manufacturers have changed and how that could affect the way they do business. To capture the attitudes of home builders, the Research Center combined qualitative research, a series of national focus groups, and a subsequent nationwide survey of builders—both production and custom. A preview of the study's initial findings was presented during the 2007 International Builders' Show.

According to the study, since the downturn of the market in 2006, home builders have made numerous changes to the way they operate. Key input from builders centered on how their expectations for product manufacturers have changed and the effects of the new climate on material usage and selection; adjustments in internal operations and purchasing decisions; interest in product innovation; and their reactions to the shifting expectations of home buyers.

Housing economy experts estimate the current home building climate is likely to continue throughout 2007, with a very gradual rebound expected as we move toward 2008. Accordingly, the study suggests that manufacturers who understand the market fluctuations and act quickly to make adjustments to their product, distribution, marketing, and sales strategies can see short-term sales improvements and be better positioned for the housing market rebound.

The full report, “Implications of the Soft Housing Market for Suppliers of Building Products,” will be available for purchase from the Research Center in June.

For more information on this internally funded Research Center study and its availability, call 800-638-8556 or visit www.nahbrc.org.