Roofing and storm update

Did you know that 2023 was the worst year in recorded US history for damage from hail, winds, and tornados? Recently I had the pleasure of talking with roofing contractors across the US about what we see in store for the roofing market in 2024. Here are just a few highlights from that conversation:

First, we talked about weather and storm damage. Repeated storms causing billions in damage pummeled the US in 2023 also with tragic loss of life.

Anyone following the market for residential remodels is aware of this trend, particularly if they are in the business of what we call "replacement" projects (roofing, siding, windows/doors). Here's how the year shaped up:

Damages weren't limited to just a few US States. The map below illustrates the billion-dollar impact across much of the Central and Eastern US.

Publicly traded companies made multiple references to this trend in their latest earnings calls. Owens Corning reported that in 2023,

"The U.S asphalt shingle market on a volume basis was up 6% compared to the prior year, driven by higher levels of storm activity."

Beacon Roofing Supply reported for the fourth quarter of 2023:

"The residential roofing sales were higher by more than 20% as higher volumes were driven by resilient underlying R&R demand and storm activity, combined with higher prices".

Now everyone is wondering: What's in store for 2024 for storm-related roofing, and for roofing in general? With strong storm activity last year, we face what industry insiders refer to as 'difficult comps'. This means it will be tough to achieve strong growth this year off of such high numbers last year.

Many contractors told us that their leads have slowed recently. Here are the top three reasons why I'm still optimistic about the US residential roofing market:

1. Weather trends

While economists don't typically predict the weather, it's vital to note certain persistent trends here: The shift from a short sharp El Ni?o to La Ni?a means trade winds from the Pacific will no longer block the US eastern seaboard from gulf coast hurricanes. That, along with still-elevated ocean temperatures from El Ni?o, means there's an elevated chance of a damaging hurricane striking the US.

And with El Ni?o winding down this Spring, the National Weather Service still predicts above-average precipitation across the Southeast - this could also have a major impact on roofing regardless of whether a major hurricane hits the US.

Those looking to gauge a local outlook for extreme weather can rely on the National Oceanic and Atmospheric Administration (NOAA). They assemble county-level maps documenting where severe storm risks are highest:

Let's move on to the second reason I'm fairly bullish on roofing for this year:

2. Aging roofs on existing homes

Replacement of aging roofs on existing homes is big business and will grow as a market driver in coming years. Why? The main reason is that a glut of homes built during the late 1990s and early 2000s are now eligible for roof replacements. Here is a chart illustrating the origin of this trend:

We know that roofing projects peak when a home reaches around 20-39 years:

Since all housing is local, researchers at John Burns Real Estate Consulting (JBREC) took the time to map out this opportunity for the industry. Here is a sample, courtesy of Building Products Research Analyst Ian Kennedy (Please reach out if you want a map detailing opportunities in your own region):

This brings us to the third and final reason I believe US roofing contractors can breathe a collective sigh of relief:

3. New Construction Activity

While the US remodeling market represents a greater end-market exposure for residential roofing, new construction activity has been on the rise as of late 2023, and this also bodes well for the roofing market. John Burns Real Estate Consulting's latest Home Builder Survey shows that starts per community are up as of February 2024, with strong gains across the US.

New construction will boost roofing even more in the second half of 2024 (driven entirely by single family construction, and despite softness in multifamily). More details on our updated roofing forecast for both new construction and remodeling, incorporating all of the insights above, are available through JBREC's interactive Demand Meter data tool.

Summing up

All things considered, this is still a good time to be a roofing contractor. The most interesting part of our conversation was hearing from the contractors themselves. While they expressed some worries over slowing leads, they still expect at least single-digit growth in 2024 (read: growth will not turn down). They are most worried about consumer demand / spending habits. We have a lot to say about that topic too but will save it for another day - Stay tuned!

As always, please do share your questions and comments below on this topic! Your questions and feedback really help inform our thinking.