RISMEDIA, Feb. 23, 2007-(WSJ.com)-The housing downturn is leaving one part of the construction industry remarkably unscathed: makers of so-called green building materials.
Purveyors of such building components as foam insulation and faux wood shingles are continuing to see gangbuster sales, almost as though the housing boom that ended a year ago were still at full tilt. Materials are considered "green," in industry parlance, when they generally help reduce energy use more than conventional materials or are manufactured in a way that has less of an impact on the environment. For example, some green shingles are made from recycled rubber.
Homes that contain a lot of green features typically cost anywhere from 3% to 5% more to build than a traditional home, industry officials say, but the homeowner usually can recoup the costs through cheaper power bills. The push toward green construction is driven in part by rising awareness of things like climate change, but many green vendors say the chief reason they are doing so well is probably that the rising price of oil has driven up the cost of heating and cooling homes.
Nationally, green homes are projected to increase to between 5% and 10% of U.S. housing starts by 2010, from 2% in 2005, according to a report last June by the National Association of Home Builders and McGraw-Hill Construction, an industry research group that is part of McGraw-Hill Cos.
James Hardie Industries NV, which makes fiber-cement siding that is an alternative to traditional wood or vinyl siding because it lasts longer, reported U.S. sales of that product jumped 16% in its first six months ended Sept. 30 compared with 2005, even as single-family housing starts were in a nose dive. Hardie, with $1.5 billion in sales last year, has taken roughly a 6% share of the total U.S. siding market since starting operations in 1992, according to Freedonia Group, a market research firm in Cleveland, and its executives say they expect to grab even more now. "In a downturn, that's where we shine," says Robert Russell, general manager of building products for the Netherlands-incorporated, company.
Honeywell International Inc. says sales of its "expanding" foam insulation product-a denser foam material rated as a more energy-efficient alternative to fiberglass-rose 20% in 2006 from the previous year. Officials of the Morris Township, N.J., manufacturer say that was down only moderately from a growth rate of 30% the year before. Carlisle Cos.'
EcoStar, a Carlisle, Pennsylvania., company that makes roof shingles out of recycled rubber, says its sales rose 35% last year from the previous year. And officials of PlastPro Inc., of Livingston, New Jersey, say sales of their doors made from mostly dense plastic to keep in more heat and air conditioning rose about 8% last year, even as sales of traditional wooden doors were mostly down.
Meanwhile, sales of many traditional building materials have been down during 2006. Sales of lumber and construction materials fell 12% in December from the same month a year earlier, according to preliminary estimates by the U.S. Census Bureau.
All over the International Builders Show that ran here in early February, suppliers of green materials were reporting stories of banner performance, even as the general mood among builders was subdued and cautious following a drop of 14.7% in single-family housing starts last year. Many industry economists predict a housing recovery is still a year away.
"Fifty-dollar- to $60-a-barrel oil is the biggest driver" behind green building, says Kermit Baker, chief economist of the American Institute of Architects, which is based in Washington. "If oil went down to $28 a barrel, I'm not sure how much of this would stick."
And that mind-set presents a challenge for green manufacturers. Solar energy, which is getting renewed attention recently, was all the talk in the 1970s after the Arab oil embargo but quickly faded away when gasoline prices went back down. The higher cost of green homes continues to be an impediment to their wide-scale adoption by the buying public, despite any savings consumers might see over time. Quadrant Homes in the Pacific Northwest, for example, reports that only about 4% of its buyers are willing to pay an extra $2,500 for an energy-savings option that includes things like better insulation and an upgraded furnace.
The builder is owned by forest-products giant Weyerhaeuser Co., where officials say many of Quadrant's customers are first-time buyers who are particularly attuned to cost. The Federal Way, Wash., company owns builders in other parts of the country, such as California, where officials say higher-income buyers are more willing to pay more for solar or other green features.
There's also a question of how much attention green suppliers will get once housing rebounds. When housing was going at full throttle, many builders didn't have time to think about different materials. Officials of CertainTeed Corp., a unit of France's Saint-Gobain Group, for instance, say they and many other makers of fiberglass insulation had trouble keeping up with orders during the boom years of 2004 and 2005. But now that housing-and home fiberglass sales-are down, "that has left room for alternate materials to come in," such as foam insulation, says Lucas Hamilton, a building-science manager at CertainTeed, based in Valley Forge, Pennsylvania.
For now, though, green is popular in some circles, as evidenced by standing-room only attendance at some panels on green construction at the builders show and a proliferation of green products in the cavernous halls of the Orange County Convention Center in Orlando. "We as builders can change the way we live," Tucson builder John Wesley Miller told a panel on "Creating the Most Energy-Efficient Community in the World."
Miller developed a 99-lot project in Tucson called Armory Park del Sol, which he says uses concrete walls and other features to help keep energy costs in the blazing Arizona sun as much as half what they would be otherwise. Concrete is gaining favor among more builders in the Sunbelt, in part, because it holds in cool air better than wood and is more durable against hurricanes, building industry officials say. Homes made out of concrete rose to an estimated 18.6% of the new-home market in 2006 from 17.9% in 2005, according to the Portland Cement Association, a Chicago trade group. In 1993, concrete homes accounted for only 3% of the market.
Manufacturers of traditional building products are trying to fight back. Timber industry executives argue that their products are greener because producing them creates less pollution than, say, a cement plant.
Louisiana-Pacific Corp. has come out with a product called TechShield, which is a block of "engineered" wood — or small chunks of wood glued together — that is wrapped in foil and used to insulate attics to help reflect the sun's heat. Officials of the Nashville, Tennessee, company say year-over-year unit sales of TechShield soared 40% in 2006 in the U.S.
Georgia-Pacific Corp. last year began rolling out a product to homebuilders called DensArmor Plus, which is a paperless version of its wallboard products. Officials of the Atlanta forest-products giant say sales of the paperless wallboard, which is designed to help prevent mold growth and uses fewer trees, more than doubled in 2006.
Other timber manufacturers have taken to marketing what they call the "greenness" of wood. Trees in a forest store carbon dioxide (which is considered a major contributor to greenhouse gas emissions), keeping it out of the atmosphere. Timber executives say wood continues to store carbon when used in a home. "The message of 'wood is good,'" says Carlos Guilherme, a Weyerhaeuser sales vice president, "is starting to get out there."