This article Reprinted from Western Roofing magazine, January/February 2007, Volume 30, number 1

 

 

Roofing to Rise Slowly in the West

Western Roofing Contractors Predict a 9.5% Increase for 2007

by Marc Dodson, editor

 

Despite dire predictions, roofing will continue to rise in the West for 2007, although at a slower pace than last year. But an increase is still an increase. Western roofing contractors responding to our survey say that, on the average, they’re expecting a 9.5% increase in business for 2007, just slightly less than the 9.7% predicted for 2006 at this time last year. The vast majority of Western roofing contractors responding to our recent business survey predicted an increase in their business for 2007. Not surprisingly, roofing contractors involved in low-slope roofing expected a higher percentage of increase for 2007 than steep-slope roofing contractors. Many noted that 2006 had turned out much better than expected and although they expect an increase for 2007; they’re concerned about the overall construction outlook. As was the case last year, a sizable portion of contractors, mostly those from metropolitan areas, were less optimistic, some were predicting a smaller or no rise in sales, with a few stating they expected a decline in sales for 2007.

                  When the figures from all the responses were taken into account, the survey results indicate the West had a fairly healthy business climate for last year with a slow, but steady increase for 2007. Most Western roofing contractors are optimistic about the coming year and, as indicated by the state map, contractors in the majority of the states in the West are predicting an increase.

                  Confirming the predictions of our readers, the majority of financial analysts, and as well as many financial indicators, point to a healthy economy for 2007.

 

2007 Increase

                  According to our compiled results, Western roofing contractors, on the average, expect their business to increase by 9.5% in 2007 over 2006 levels. By comparison, the average predicted 2006 increase was 9.7%, 15.4% for 2005, 16.3% for 2004, 10.9% for 2003, 7.2% for 2002, 13.1% for 2001, 12.6% for 2000, 12.8% for 1999, 21.9% for 1998, 12.8% for 1997, 16.4% for 1996, 13.7% for 1995, and 11.3% for 1994. It should be noted that the graph shows predicted increases from the previous year, not market size.

                  The survey results are based on average percentages taken from the surveys returned by Western roofing contractors and do not take into account the dollar volume of the contractor nor the market size from which the contractors are reporting.

 

Associations

                  Just over 55% of those contractors responding stated that they belong to at least one construction-related association (local, state, regional, or national). This figure is up slightly from last year’s 54%, and up from the 2005 figure of 52%. Association membership has historically gained ground during a rising economy.

 

Buying Roofing Materials

                  A number of years ago, we started asking where roofing contractors purchased their materials. Each year, we think we can spot a trend and try to draw some sort of conclusion, then the following year the figures would change dramatically and blow our theory away, so we’ll just give you the numbers: During 2006, 66% of roofing materials came through a roofing materials distributor, in 2005 it was 75% which was almost identical to 2004’s 74%, in 2003 this figure was 69% and 61% in 2002.

                  Sixteen percent of roofing materials were purchased directly from the manufacturer during 2006. Nine percent of roofing materials were purchased from a building materials supplier, and 6% of roofing materials were purchased from a warehouse home center (e.g. Home Depot). Sixty-three percent of the roofing contractors stated that they purchased some material or supplies at least one time last year from a warehouse home center. This is up from last year’s 59%.

 

Competition

                  In bad times, you’re trying to find work. In good times, your best foreman last week is now the new roofing contractor in town. A growing market not only means more jobs, it also attracts competition from other areas. That being said, the total number of roofing contractors in the West is expected to rise 4.8% in 2007, up slightly from 4.5% last year. This is perhaps another indication that roofing in the West is still on the rise, more contractors expected in the West. This is not exactly good news for the established contractor, but it does confirm the optimistic view that the West is a growing market.

 

Concerns & Problems

                  For the first time in five years, “Workers’ Comp/Insurance Costs,” has been toppled from the number one spot on our “Top 10 Widow Makers” list (see side bar) according to the comments made by Western roofing contractors.

                  The new number one concern is “Finding (and keeping) Qualified Workers.” This is a major problem, and several contractors noted that they could do more work if they could find the crew to handle the job. Concern about the economy is also rising, up from the number nine to the number five spot.

 

Comments from the Field

                  Our readers speak out on the state of the Western roofing industry:

•               “New construction very good in our area, reroof slow, not a lot of older homes in the area. Potential for repair tile roofs, in tract work done over ten years ago good due to failure of underlayments, expanding into other areas where… residential homes are located. Insurance is coming down, better coverage liability and work comp. Bond prices going up in state, overall outlook is good,” says Billy Ray Black, owner, Golden Roofing, Palmdale, Calif.

•               “It is going to be a tough year in 2007,” notes Martin Stout, vice president, Mayer Roofing, Riverside, Calif.

•               “I believe that the roofing industry will experience record sales in 2007, however the ability to build these roofs will be cut short because of the lack of a qualified work force,” states Jerry Yerain, owner, Pinnacle Roofing, Tracy, Calif.

•               “Very good for commercial roofing and high-end residential and reroofing. Average residential reroofing cut-throat pricing next spring and early summer,” says Steve Amend, president, Roofing Services, Santa Rosa, Calif.

•               “Once again I feel positive about the coming year. A threat of El Niño and low interest rates continue to fuel the residential roofing market in Southern California,” states Eric Winchester, president, Massie Roofing Co., Pasadena, Calif.

•               “Solar tubes are being requested more as homeowners are improving their homes instead of selling. Also ventilation is needed. I see a lot of roofing contractors not adding ventilation to newly installed roofs to keep manufacturers warranty,” notes John Bovie, Bovie Roofing Specialty, Santa Rosa, Calif.

•               “Outlook in 2007 is promising as we are one of the fastest growing counties in Montana,” says David Smith, president, Smith Roofing, Victor, Mont.

•               “I don’t know about anyone else out there, but I am tired of manufacturers and suppliers selling TPO out the back door to unlicensed fly-by-night contractors that have no insurance, workers’ comp, etc. They are killing the market with low-ball prices. I am going to buy product from manufacturers with suppliers that do not sell their materials to these people,” states Bill Thomas, Thomas Roofing, Inc., Butte, Mont.

•               “Finding qualified mechanics continues to be our biggest problem. Health insurance costs and immigration concerns are close seconds,” says Ken Dillon, president, D&D Roofing and Sheet Metal, Sparks, Nevada.

•               “I hope it is a strong year, as good as this year,” states Owen Davies, AAA Applicating Specialists, Spring, Texas.

•               “In Colorado if there is no hail, the residential reroofing market is slow,” notes Doug Sweeney, Tip Top Construction, Littleton, Colo.

•               “I expect less work,” says Arne J. Kantola, Kantola’s Roofing, Cocolalla, Idaho.

•               “Commercial market remains strong, however, the residential market has softened significantly over the last 90 days,” notes Pat Large, president, Quality Tile Roofing, Boise, Idaho.

•               “Due to the cost of housing, whether ownership or rental, I see more business moving out of California. Also the cost of new construction and remodeling is too costly due to additional costs that are being imposed on developers by cities, counties, and the state in order to shore up their overpaid perks and retirement,” says John Butts, American Roofing, Bellflower, Calif.

•               “New construction seems to be on the rise and I have contracted 14 tilt-up warehouses in the last three months for spring 2007,” states Ken Regevig, president, Regevig Roofing Company, Hayward, Calif.

•               “Positive economic indicators for our service area appear they will continue in 2007. The reroofing market for both commercial and residential should, at a minimum, remain at 2006 levels and the forecast for more opportunities is good for the coming year,” states Sig Hall, Western Pacific Roofing, Palm Springs, Calif.

•               “The state of Texas should create a ‘user-friendly’ track record for existing roofing contractors. Accountability should be by the state of Texas so contractors can have an I.D. number. This would eliminate contractors not on the ‘up-and-up’ about their services. It is my opinion that the industry would greatly benefit with a controlled program and require CEU’s for roofing contractor’s classes sponsored by RCAT,” recommends William Hood, owner, Billy Hood and Associates, Houston, Texas.

•               “We need to work harder industry-wide to recruit and train more roofers. The pool of workers available who are willing to do roofing work and do it well is dwindling and approaching crisis levels,” advises Travis Nelson, Brown Roofing & Siding, The Dalles, Oregon.

 

In Closing

                  And finally, I guess sometimes you either have to develop a thick skin or a good sense of humor to stay in this business. “We continue to successfully avoid having to get real jobs. If inequitable contracts and insurance cost gouging can’t raise a smile, maybe we can work up a sweat unplugging the money chute. And what do we do with all these extra over-trained applicants? Let them continue to wash and service the trucks?” says Tom Johns, project manager, National Roofing of Arizona, Albuquerque, New Mexico. •••

 

√√√√√ Side Bar √√√√√√√ (see last year)

The 2006 Western Roofing

Contractor Top 10 Widow Makers

The top ten concerns (in order of importance) of Western roofing contractors as indicated by our survey.

 

2007     2006

1               2               Finding Qualified Workers/Training Programs

2               1               Workers’ Comp & Insurance Costs

3               4               Construction Defect Lawsuits/Mold

4               3               Illegal Contractors (underground economy)

5               9               Slow Economy

6               6               Too Many Contractors

7               8               Maintaining Profit Margins

8               7               Government Regulations/OSHA

9               5               Material Availability/Quality/Delivery

10            10            Maintaining Quality in Low Bid Situations