What We’re Reading

Builder Confidence Stays At Healthy Level In July1

National Association of Home Builders  7/17/2018

"Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Builders are encouraged by growing housing demand, but they continue to be burdened by rising construction material costs,” said NAHB Chief Economist Robert Dietz. “Builders need to manage these cost increases as they strive to provide competitively priced homes, especially as more first-time home buyers enter the housing market.”"

Read the full article here.

Construction Cost Data Shows Effect Of Trade Disputes2

Associated General Contractors of America  7/11/2018

"Construction costs accelerated again in July, with steep increases for a wide range of building and road construction materials as tariffs against foreign goods come into effect, according to an analysis by the Associated General Contractors of America of new Labor Department data.

“Contractors’ costs for a wide range of materials and services have escalated dramatically in the past few months, putting a squeeze on profits and dimming the outlook for both public and private projects,” said the association’s chief economist, Ken Simonson."

Read the full article here.

Homebuilder Sentiment, Still High, Stalls As Tariffs, Labor And Land Drive Up Costs3

CNBC  7/17/2018

"U.S. homebuilders are heartened by the strong demand and tight supply in today’s housing market, but they still can’t meet that demand as much as they might like. Consequently, their level of confidence is stuck in neutral. A monthly sentiment survey from the National Association of Home Builders was unchanged in July, standing at 68. Anything above 50 is considered positive sentiment. The survey was at 64 in July of 2017 and hit a cyclical high of 74 in December."

Read the full article here.

U.S. Housing Starts Dropped Sharply In July4

The Wall Street Journal    7/18/2018

"U.S. housing starts fell starkly in July after making solid gains the prior month, as single-family home construction and apartment building dropped from May.

Housing starts declined 12.3% in July from the prior month to a seasonally adjusted annual rate of 1.12 million, the Commerce Department said Wednesday. This was the largest monthly percent drop since November 2016, in part representing bounce back from stronger 4.8% starts growth seen in May."

Read the full article here.

Lumber Prices Increase While Gypsum Falls In July5

Builder Online  7/13/2018

"For the second consecutive month, softwood lumber (+4.0%) led the way in price increases for building materials, followed by oriented strand board (+2.2%, not seasonally adjusted), says David Logan in the NAHB's Eye on Housing blog. According to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics for July, the indexes for ready-mix concrete (-0.3%) and gypsum products (-0.6%) both declined for the second month straight."

Read the full article here.

Public Markets6

screen_shot_2018-08-07_at_4.49.10_pm.png

screen_shot_2018-08-07_at_4.49.35_pm.png

*Calculated as (EBITDA – Capex) / EBITDA

Public Comparables5

Building Products & Services

As of July 31, 2018

screen_shot_2018-08-07_at_4.51.35_pm_0.png

Public Comparables6

Building Products Distributors

As of July 31, 2018

screen_shot_2018-08-07_at_4.53.19_pm.png

Construction Materials

As of July 31, 2018

screen_shot_2018-08-07_at_4.56.34_pm.png

 

Relevant Transactions6

screen_shot_2018-08-07_at_4.57.37_pm.png

screen_shot_2018-08-07_at_4.58.35_pm.png

screen_shot_2018-08-07_at_4.58.59_pm.png

Representative Building Products & Materials Transactions

screen_shot_2018-08-07_at_4.59.25_pm.png

 

1. NAHB

2. Associated General Contractors of America

3. CNBC

4. The Wall Street Journal

5. Builder Online

6. Factset

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.​