How the Housing Sector Has Been Impacted by the Economic Slowdown

Exchanges

Goldman Sachs

Business

4.4 • 1K Ratings

🗓️ 21 April 2020

⏱️ 16 minutes

🔗️ Recording | iTunes | RSS

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Summary

In this episode, Terry Hagerty, co-head of homebuilding & building products investment banking for Goldman Sachs, discusses how COVID-19 has impacted the outlook for housing and the broader building products sector. Despite the severity of the current slowdown, Hagerty points to favorable demographic tailwinds as reasons to expect a return to industry growth into 2021. Additionally, Hagerty explains why the sector may be poised to rebound more quickly from this crisis than that of 2008, driven by more favorable supply/demand dynamics, consumers’ relatively strong financial position, and healthy corporate balance sheets. “When I look at the balance sheets and liquidity positions of my clients, both in home building and building products, it’s quite strong,” Hagerty says. “Most of them have access to the capital markets, given some of the Fed action that we’ve seen, and generally they’re all positioned to weather what could potentially be a very extended downturn. So the outlook today is much different than 2008.”

Transcript

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0:00.0	This is Exchanges at Goldman Sachs, where we discuss developments currently shaping markets, industries in the global economy.
0:13.2	I'm Jake Stewart, global head of corporate communications here at the firm.
0:16.0	Today's guest is Terry Hagany, who co-leaders are building products and home building
0:19.6	practice in the Investment Banking Division.
0:22.4	The question for him today is how has COVID-19
0:25.3	had an impact on the outlook for housing and the broader building products sector.
0:29.5	Terry, thanks for joining us today. Thanks very much, Drake. It's great to speak.
0:33.2	So Terry, before we address the current crisis
0:35.6	and COVID-19, you talked to a lot of CEOs.
0:38.6	What were they thinking coming into this year
0:40.6	and what were they expecting in 2020?
0:42.8	It's a good question.
0:44.0	When I talked to my CEO clients in late 2019,
0:47.6	they were very optimistic about 2020.
0:50.2	There's a number of reasons for that.
0:51.8	The first is the supply and demand dynamic in the sector.
0:55.0	So on the demand side, there's been a lot of conversations about the millennial generation and their extended adolescence,
1:01.0	the fact that they've been delaying family formation and delaying
1:04.1	buying homes. One of my favorite statistics is that the median age of a home buyer in 1985 was 32 and today
1:11.6	that's 47. That said we were really starting to see that trend change and the
1:16.7	millennial homebuyer was emerging. Now this generation, which is 70 million Americans
1:21.5	age 20 to 40, is entering an age band where you typically see home ownership move from around 30% to more like 65%.
	...

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