Why the Health of Paint Sales Reflects the Health of the Housing Market
- Aug. 10, 2016
- Rachel Scott
- Real Estate Tips
The housing market has a huge impact on paint sales because both buyers and sellers rely on paint to make improvements to a property. Those who purchase existing homes tend to repaint after closing, and many of those looking to sell their homes give certain rooms a fresh coat of paint and convert walls back to neutral colors so they can increase a home's appeal. In fact, sellers who invest in a new paint job for a few key rooms have the potential to see a 1 to 3 percent return on their investment.
An increase in housing starts is another key indicator that paint sales will grow, as builders need paint for both the exterior and interior of newly built homes. Right now, both housing starts and existing home sales are up compared to 2015.
Benjamin Moore's paint sales have risen due to this year's stronger existing home sales.
Paint Sales and the Current Housing Market
Michael Searles, CEO of leading U.S. paint manufacturer Benjamin Moore, recently told Fortune that his company's paint sales have risen as a direct result of this year's stronger existing home sales. He attributed the rise in home sales (and subsequently, paint sales) to an increase in savings and disposable income and a decrease in consumer debt levels.
Searles also told Yahoo that he predicts Benjamin Moore will continue to grow as the housing market improves.
"Existing home sales is really the best indicator of our business," Searles explained. "People repaint the home when they move into a house."
He went on to say that over the next 10 years, millennials will also have a huge influence in Benjamin Moore's growth. More and more members of Generation Y, Searles said, will forego renting in favor of homeownership over the next decade, and chances are many of them are going to want to give their new homes a fresh coat of paint.
Benjamin Moore, however, is not the only paint manufacturer benefiting from the improving health of the housing market. Sherwin Williams' paint stores experienced an 11 percent increase in first-quarter revenue, and the company saw a 44 percent increase in paint store profits.
More homes being bought, sold and built means more families and construction companies purchasing paint for renovations, remodels and staging.
Other Industries that Benefit from a Healthy Housing Market
Of course, a lot more goes into building and renovating homes than a fresh coat of paint, which is why it is not only paint companies that prosper when more homes are being built and sold. In a healthy housing market, companies that manufacture building supplies can also experience large increases in sales, revenue and profits. USG Corp., a Chicago-based company that makes Sheetrock gypsum drywall and grid ceiling tiles, had an incredible first quarter. According to CEO James Metcalf, it was the company's best quarter in almost 10 years, with its net income almost tripling and company sales rising by 7 percent.
One thing to keep in mind, however, is that the increase in housing starts this year could simply be a result of the mild winter experienced in much of the U.S. Scott Santi, the CEO of Illinois Tool Works Inc., which experienced a 4 percent increase in its first quarter operating margin as compared to last year, said the warm weather may have simply pushed up the start date of work that was already planned.
"There's really no way to factor weather in," Santi explained, according to the Wall Street Journal. "We certainly exited the quarter in pretty good shape. We're not seeing anything slow down."
If the housing market does continue to grow and strengthen, it seems buyers and sellers won't be the only ones who reap the rewards.