Some people say that the 2007-11 period marked one of the worst downturns in the history of the U.S. housing market, but Mike Thaman of Owens Corning disagrees.
“Personally, I think if you went back and studied the last 200 years, I don’t think it’s one of the worst housing downturns in U.S. history. I think it is THE worst downturn in U.S. history, and I think there’s not even a downturn that’s a close second place," said Mr. Thaman, the chairman and chief executive officer of the insulation-and-building products industry leader.
But the housing market is rebounding. If it continues the way it has been going, it could be enough to power the American economy for the next three or four years, the CEO of the Toledo company said.
Mr. Thaman discussed his “Thoughts on Housing Recovery” Monday in downtown Toledo at a meeting of the Rotary Club of Toledo.
As the No. 1 fiber-glass insulation producer in the country and No. 2 seller of roofing materials, OC has been in a unique position to observe the fall of the housing market and its recovery.
In the five years prior to last year, the prevailing sentiment among investors was “anywhere but the U.S., and anywhere but housing,” Mr. Thaman said. They did so with good reason.
Over the last 50 years, it was not unusual for housing starts to rise to over 2 million units a year in good times and collapse to 1 million units a year during an economic downturn, Mr. Thaman said. But in the recent downturn, housing starts fell to about 600,000 a year and then stayed there 4½ years, he added.
“So unlike other housing downturns, this has been a downturn that is deeper and much more prolonged than any downturn we’ve seen in the history of the housing industry. And fundamentally, it’s because it’s been a credit issue and not a home-construction issue,” he said. “So what you’re seeing in the housing economy is exactly what we’re seeing in the economy broadly, which is there was too much debt, and that the debt restructuring that was needed to happen in housing has had a profound effect on our ability to get a constructive housing market."
But Mr. Thaman said OC believes that the housing uptick in the last six months is real. According to industry projections, housing starts could rise from 600,000 to 1.5 million in 2015. Because each new-housing start creates three jobs, the recovery could create 3 million jobs — or more — two years from now, Mr. Thaman said.
Foreclosure still remains a problem. But the OC executive said investors are starting to snap up many of the foreclosed properties, and as a result, home prices are starting to rise. As prices rise, many homeowners who were reluctant to pay their mortgages because they owed more than their homes were worth are starting to rethink that position, he said.
“We see very good news on the existing home front. In fact, in probably the top 20 markets today, those markets are inventory-constrained,” Mr. Thaman said. “So if you go to markets like Houston, you go to markets like Phoenix, Realtors will tell you that inventories in those markets could be zero days to negative. Where people hear of a house going on the market and the house sells before it even hits the market.”
OC’s market research from 2006 to 2011 would have said that the American dream of owning a home had become the American nightmare, Mr. Thaman said. People watched their housing values fall, viewed their homes as a giant money pit, and suffered psychologically in terms of optimism, well-being, and feelings of net worth, he said.
But, “We think the change you’re seeing in housing, which is typically the beginning of an economic recovery in the U.S., could now begin to power the U.S. economy for the next three or four years,” he said, “and give us three or four years of good growth in housing, good growth in jobs, good growth in housing net worth, supporting a little bit better consumption, and the purchase of durable goods.”
Contact Jon Chavez at: