Homebuilding fundamentals remain 'robust': Saint-Gobain NA CEO

Mortgage rates have slowly fallen for the second week in a row, with the 30-year fixed mortgage rate just above 7%. With the potential for mortgage rates to come down further, the housing market may see a bit of a turnaround for homebuyers. However, the supply of homes is still low.

Saint-Gobain North America CEO Mark Rayfield (SGO.PA) joins Market Domination Overtime to discuss the state of homebuilding and the broader housing market.

On the fundamentals of homebuilding in North America, especially after COVID-19, Rayfield states: "It's still a very robust market. So for the vast majority of building materials, if you look at exterior products and roofing and siding and gypsum and insulation, the market is there, thereabouts at capacity. Not sold out like it was in COVID. But depending on where you are regionally, there could be some supply challenges, not long. So that is another reason I say the market remains quite robust at these housing levels."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Nicholas Jacobino

Video Transcript

Some good news for home buyers, mortgage rates edging lower for the second straight week.

We're speaking with a top executive of one of the top building materials suppliers about the demand they are seeing right now.

So joining us is Saint Gobain, North America CEO Mark Rayfield Mark.

It is good to have you on the show and and maybe Mark just we can start with your general take there on the housing market.

What are you seeing?

Mark?

What do the fundamentals look like?

So, so first off, thanks for having me on and, and uh on the housing market, we have remained relatively bullish on, on the current projections and going forward.

There's a great under built capacity in, in, in home and housing right now, both in the US and in Canada, probably 7 million under built in the US and 3.5 million under built in Canada.

So the fundamentals remain strong as well as the fundamentals are still strong on remodeling and renovation, nothing like it was in COVID, but still quite robust.

So, so while you have interest rates high, you have housing starts and completions on a month to month basis.

Getting a lot of attention in general.

The basic fundamentals of housing in North America are very strong and will be for the next number of years.

And Mark, how are you all doing with uh having enough supply to keep up with that demand?

Obviously, that was an issue during COVID.

What does that landscape look like?

Now?

It, it's much better right now.

I mean, it's still, it's still a very robust market.

So, so for the vast majority of building materials, if you look at exterior products and roofing and siding and gypsum and insulation, the market is there thereabouts at capacity not sold out like it was in in uh COVID, but depending where you are regionally, there could be some supply challenges, not not long, but so that is another reason I say the market remains quite robust at the at these housing levels.

So the the housing you know, looks robust.

I'm curious mark.

Where are you seeing kind of the most activity within that market though, you know, is, is it um is, is it new construction mark?

Is it remodeling?

Where are you seeing it?

So it's a mix.

What I like to say is you want to know where the activities follow the people.

So obviously the Southeast and Southwest where people are gravitating to to somewhat has a greater degree of activity.

But we have two buckets.

You have the large home builders are still building at a relatively good clip and having a good success.

They're looking out long term and realize there's need for more homes and you have a lot of, uh, weather impacted building going on for remodeling, whether it be after the snow thaws and the storms of the west coast now, really building up on a lot of remodeling or out through the Midwest into the southeast, which has a lot of, uh, weather impacted remodeling taking place.

Mark.

You guys aren't just residential, you don't provide just residential uh materials.

You also do other kinds of construction.

So what, what's the sort of share in North America or what, how does it break down in North America?

And what's the demand looking like in those other areas?

So we are predominantly residential, so closer to 75% residential than another number.

So we, but we have a significant commercial business both in our gypsum insulation, interiors, ceilings business as well as we have some very innovative products with sage glass, Electromatic glass.

So in, in, in commercial, you have a softer market, particularly when you're looking at the the office space in the major cities, there's some remodeling of those into, into, into, into housing units.

And I think your top properties are getting renovated and rebuilt and, and people are coming back in, but it's certainly a softer market till you get to biofarm transportation airports, which is still a relatively good marketplace.

So it's, it's certainly not as robust as residential.

I, I'm curious too, Mark.

You know, we, we talk about obviously, of course, the, the labor market on this show, curious how, how you're seeing that?

Are you all hiring right now, Mark and, and are, are you if you, if so, are you, are you finding the people you wanna hire?

Yes.

So, so we are hiring, we continue to hire someone watching.

We'd love to talk to you.

So, so I think we're still hiring.

We're growing in North America doing a lot of investments.

So we're always looking for, for talent in the business and the labor market and and attracting labor has gotten better again off of the really challenging times of COVID.

But it's still, you need to have the right value proposition.

You need to have the right work environment.

You need to have something that they want to embed into.

What we're seeing is the labor force coming in doesn't just want a job.

They want to be connected to something they believe in.

We, we are decarbonizing the construction market trying to make the world a better home if you will through construction and light sustainable construction.

So they want to have that purpose to come forward.

So more so than ever, you need a culture and a welcoming environment to bring a very diverse workforce in uh Mark.

I, I wanna go back to the beginning where we talked about mortgage rates and we are starting to see a little bit of a tick down.

What kind of magnitude of tick down in those, uh, mortgage rates will we need to see to unlock?

Really sort of the next tranche of demand for residential construction?

That's a great question.

Um, I can give you an opinion.

I don't think I have the answer.

You know, the reality is that I think if you look at some of the stuff out of the National Association Association of Home Builders and some numbers, if you were to go down in the six and a quarter percent, you know, another 4 to 5 million people could afford a home today.

If you go down to 5% it's another 10 million.

So just getting to those levels brings the affordability gap up for, you know, really 10 million new people to enter the housing markets.

The real lock is also just people with a 3% mortgage.

Will they sell their house and go to a larger or new house for 6% right now.

Maybe when you get below six, I think you start to see people start to unlock that the, the historic average of mortgages is in the 7% range if you take the long view of it.

So we're, we're higher than we're used to in the last decade, but we're not outrageous.

Right.

Mark Rafield.

Thanks so much for your perspective.

Appreciate it.

Thanks for your time.

Have a great day.

Take care.

You too.