U.S. and Canada Building
Products & Materials

Industry Insights
Spring 2024

124

M&A transactions closed in the U.S. and Canadianbuilding products and construction materials industry
during 2023, a 25% decline from the prior year

82%

Percentage of M&A transactions completed bystrategics or sponsor-backed strategics in 2023

7.62%

Highest average 30-year fixed mortgage rate in the past
decade (7.62% in Oct. 2023 vs. 6.82% in Mar. 2024)$1.17 T

U.S. non-residential construction spending in 2023
totaled $1.17 trillion, a 21% increase over the prior year

Executive Summary2

U.S. Market Update

U.S. Housing Indicators
The 30-year mortgage rate set a decade-long high, averaging 7.62% in October 2023. Since October,rates have shifted down slightly, averaging 6.82% in March 2024. Home buyers and investors havebegun settling into the new, higher interest rate environment after rates reached historic lows during
the pandemic. The 10-year Treasury rate largely mirrored the 30-year mortgage rate movement, andthe federal funds rate experienced several consecutive rate hikes in the first half of 2023. During 2024,
mortgage rates are forecast to pull back gradually to 6.0 – 6.5% and continue to decline in 2025.
The Housing Market Index (HMI), a monthly measure of builder confidence, has been rising since
September 2023; however, it still trails 2021 figures as global conflicts, high input costs and inflationpressures remain. The Consumer Confidence Index (CCI) in 2023 held constant with 2022 levels, asconsumers continued to have mixed views of the labor market and overall economic outlook. Both the
HMI and CCI as economic indicators have improved since the start of 2024, indicating a returned
confidence among builders and the public in the near-term housing market.

The 30-year fixed mortgage rate, effective federal funds rate, 10-year treasury rate and HMI are not seasonally adjusted.
CCI indexed to 1985
Sources: Federal Reserve Bank of St. Louis, Economic Research (FRED), The Conference Board, National Association of Home Builders, U.S. News and World Report4U.S. Housing Indicators
Key Housing Indicators*

Key Interest Rates
9.0%

30-Year Fixed-Rate Mortgage

Effective Federal Funds Rate

10-Year Treasury

8.0%

160

Housing Market Index (HMI)

Consumer Confidence Index (CCI)

140

7.0%

120

6.0%

100

5.0%
80

4.0%

60

3.0%
2.0%

40

1.0%

20

0.0%
Dec '14

Dec '15

Dec '16

Dec '17

Dec '18

Dec '19

Dec '20

Dec '21

Dec '22

Dec '23

0
Dec ’14

Dec ’15*Index values greater than 50 indicate a positive view by builders.
The 30-year fixed mortgage rate, effective federal funds rate, 10-year Treasury rate and HMI are not seasonally adjusted.
CCI indexed to 1985
Sources: Federal Reserve Bank of St. Louis, Economic Data (FRED), The Conference Board, National Association of Home Builders, U.S. News and World Report

Dec ’16

Dec ’17

Dec ’18

Dec ’19

Dec ’20

Dec ’21

Dec ’22

Dec ’23

5

U.S. Housing Starts
Both single-family and multifamily housing starts in 2023 experienced substantial year-over-year
growth but lagged behind 2021 starts as home builders struggled with supply chain challenges,
higher building material and rising labor costs. Total U.S. housing starts remained above the trailing
10-year average during the year.
Regionally, the southern U.S. experienced the highest volume of single-family housing starts in 2023
and the greater part of the past decade; this growth is attributed to population movement due to mild
climates and lower cost of living in the region.
Weather delays across the country caused U.S. housing starts to lower in January 2024. These delays
are not expected to affect the rest of 2024 as housing starts rebounded in February due to a favorable
rise in temperatures, as well as the expectation that borrowing costs will lower in 2024.

Seasonally adjusted annual rate
Sources: Reuters, U.S. Department of Commerce: Census Bureau

6

U.S. Housing Starts
Trailing Annual U.S. Housing Starts
in thousands

Housing Starts - Single-Family

Housing Starts - Multifamily

1,400
1,200

1,054

1,000
800
600

508

400
200
0
Dec-14

Dec-15

Dec-16

Dec-17

Dec-18Dec-19Dec-20Dec-21

Dec-22

Dec-23Single-Family

Multifamily

2023 YoY ∆ 18.8%2023 YoY ∆ 10.2%

Seasonally adjusted annual rate
Sources: Reuters, U.S. Department of Commerce: Census Bureau

7

U.S. Home Sales and Inventory — New Home Sales and Supply
In 2023, approximately 668,000 new single-family homes were sold, an increase of approximately 4.4% year-over-year. This
increase in new home sales was driven by a 6.6% decrease year-over-year in new home prices, following a volatile 2022 during
which purchasers were impacted by rapid rate hikes.
New single-family home sales are expected to increase by approximately 7.2% in 2024 and by 8.5% in 2025. New home sales areprojected to grow, reflecting long periods of low supply and pent-up demand. Growth is expected particularly from first-time homebuyers waiting for a more favorable interest rate environment before they wade into the market.
New Home Sales and Supply
New Home Sales(units in thousands)

Single-Family New Home Sales

New Home Prices(USD in thousands)

Median New Home Price875$500.0700$400.0525$300.0350$200.0175$100.00$0.0
Dec ’15

Dec ’16

Source: Wells Fargo U.S. Housing Forecast

Dec ’17

Dec ’18

Dec ’19

Dec ’20

Dec ’21

Dec ’22

Dec ’23

Dec ’24
Projected

Dec ’25
Projected
8

U.S. Home Sales and Inventory — Existing Home Sales and Supply
Existing home sales, which account for much of the housing market, totaled 4.1 million in 2023. This represents a year-over-year
decrease of 18.3%. The 2023 decrease in sales volume was attributed to the 2022 spike in median sale price, as buyers and sellers
were misaligned on home values.
For the 2024 – 2025 projected period, existing home prices are expected to increase by 3.1% and 4.4%. The overall volume ofexisting home sales is expected to rise with anticipated interest rate decreases.

Existing Home Sales and Supply
Existing Home Sales(units in thousands)

Single-Family Existing Home Sales

Existing Home Prices(USD in thousands)

Median Existing Single-Family Home Price

6,000$500.04,800$400.03,600$300.02,400$200.01,200$100.00$0.0
Dec ’15

Source: Wells Fargo U.S. Housing Forecast

Dec ’16

Dec ’17

Dec ’18

Dec ’19

Dec ’20

Dec ’21

Dec ’22

Dec ’23

Dec ’24

Dec ’25

Projected

Projected
9U.S. Home Prices
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which measures average home prices in major metropolitan areas across thenation, rose 5.4% in December 2023 from the prior year.
The Case-Shiller 10-City index increased 7.1% in December 2023 over the prior year, while the 20-City index rose 6.1%.
According to the Zillow Home Value Index (ZHVI), the price of a typical U.S. single-family home increased approximately 41% between January 2020 andAugust 2023. The sharp rise in prices is due to the strong growth in demand for homes post-pandemic, coupled with a tight supply. Housing supply
tightened following the pandemic as homeowners were reluctant to forfeit their existing lower interest rates, given a lack of alternatives.

S&P CoreLogic Case-Shiller Home Price Indices*350

10-City

20-City

U.S. National Home Price NSA

325~40% increase in national home prices
between 2014 and 2020

300
275
250
225
200

Additional ~30% increase in national
home prices between 2021 and 2023

175
150
125
Dec ’14

Dec ’15

Dec ’16

Dec ’17

Dec ’18

Dec ’19

Dec ’20

Dec ’21Monthly, indexed to January 2000
*The S&P CoreLogic Case-Shiller Home Price Indices are not seasonally adjusted; they are calculated monthly using a three-month moving average and published with a two-month lag.
Sources: S&P Dow Jones Indices LLC, Federal Reserve Bank of Chicago, Federal Reserve Bank of St. Louis

Dec ’22

Dec ’23
10

U.S. Home Remodeling Activity
Based on the Leading Indicator of Remodeling Activity (LIRA*), spending for improvements and repairs to owner-occupied homes increased 2.2% in Q42023 and is expected to decrease throughout 2024, driven by high interest rates, elevated material costs and labor constraints.
The remodeling market slowdown is connected to the spike in home prices across the country. In the current high-interest-rate environment,
homeowners do not expect home renovations to generate significant incremental value. Although substantial remodeling projects have slowed, if thedemand for new homes continues to outweigh the supply, homeowners will return to making improvements to their existing properties.

Leading Indicator of Remodeling Activity (LIRA*)

$600
$550

15.9%
10.9%

11.3%

11.7%

12.0%

$400

$371

$383

$396

$406

16.3%

11.6%

$500
$450

17.6%

$414

$444

$465

$472

LIRA Projections
20%
13.4%
$469

$485
9.3%

15%
$490
5.4%

$481

$464

2.2%

$454

$452

$450

-1.2%
-6.3%

$350

10%
5%
0%

-7.8%

-6.5%

-5%

$300

-10%

$250

-15%

$200

-20%
Q1 '21Q2 '21Q3 '21

Q4 '21

Q1 '22Q2 '22Q3 '22

Q4 '22

Q1 '23Q2 '23Q3 '23Q4 '23Four-Quarter Moving Rate of Change

Homeowner Improvements and Repairs
Four-Quarter Moving Totals (USD inbillions)

Historical EstimatesQ1 '24P Q2 '24P Q3 '24P Q4 '24P*The LIRA represents the estimated annual rate of change in spending for the current quarter and subsequent three quarters. This annual or moving four-quarter rate of change compares total
spending in any given four-quarter period to the total spending that occurred in the four quarters prior to that period. As of April 21, 2016, the LIRA has undergone a major rebenchmarking andrecalculation to better forecast a broader segment of the national residential remodeling market.
Source: Joint Center for Housing Studies, Harvard University

11

U.S. Non-Residential Construction Activity
In December 2023, non-residential construction was at a seasonally adjusted annual rate of $1.17 trillion, representing an increase of 21.0% over theprior year.
Both the private and public non-residential construction sectors experienced year-over-year increases, respectively, of 19.7% and 23.0%.
Overall, all segments of non-residential building construction grew in 2023, and the manufacturing sector witnessed record growth. Projected growth in
2024 and 2025 within the segment is expected to stabilize and return to historic levels. Recent investment was fueled by government subsidies through,e.g., the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA) and Creating Helpful Incentives to Produce Semiconductors (CHIPS).

Non-Residential Construction Spending
USD in billions

Non-Residential Construction$1,300Non-Residential Construction YoY Change

35%$1,20030%$1,10025%$1,000

20%

$900

15%

$800

10%

$700

5%

$600

0%

$500

-5%

$400
Dec '14
Seasonally adjusted annual rate
Source: U.S. Census Bureau

Dec '15

Dec '16

Dec '17

Dec '18

Dec '19

Dec '20

Dec '21

Dec '22-10%
Dec '23

12

U.S. Non-Residential Construction by Segment - Manufacturing32%
2023 YoY
GrowthKey Drivers
 Computer and electrical segment
 Government subsidies
 Efficiency and utilization goals

The manufacturing construction segment saw record investment in 2023, largely due to government
programs such as the IIJA, IRA and CHIPS and Science Act fueling spending.
2024 is expected to bring normalized spending and growth, though the computer / electricalcomponents subsegment and availability of labor are the near-term focal points.

Seasonally adjusted
Source: American Institute of Architects, Atlantic Council, JLL, U.S. Census Bureau

13

U.S. Non-Residential Construction by Segment - Office6%2023 YoY
GrowthKey Drivers
 Return to office initiatives
 Refreshed office space Unemployment rates

2023 proved to be a year in which corporations worked to balance hybrid work policies, as somecompanies experienced a drop in work efficiency the year prior.
Nominal near-term growth is expected in the office segment as companies continue to sublease or
repurpose existing space, and office vacancy rates remain near historic highs.

Seasonally adjusted
Source: American Institute of Architects, Atlantic Council, JLL, U.S. Census Bureau

14

U.S. Non-Residential Construction by Segment - Education

18%
2023 YoY
GrowthKey Drivers
 Aging education buildings
 Hybrid learning environments
 Population below age 24

Higher education has experienced a strong need for modernization from pandemic-related increases inhybrid/online enrollments.
Continued investment in education infrastructure is expected from both new builds and renovation
projects.

Seasonally adjusted
Source: American Institute of Architects, Atlantic Council, JLL, U.S. Census Bureau

15

U.S. Non-Residential Construction by Segment - Healthcare

17%2023 YoY
GrowthKey Drivers
 Modernization and renovations
 Aging population
 Public funding

The U.S. healthcare system has seen an influx of federal and state investment that is expected tocontinue for the next 2-3 years.
The healthcare construction industry is projecting modest growth through 2025 based on input costs
and changes in overall demand.

Seasonally adjusted
Source: American Institute of Architects, Atlantic Council, JLL, U.S. Census Bureau

16Canadian Market Update

Canadian Housing Indicators
Canadian housing starts in January 2024 increased year-over-year by 10.5% but decreased by 11.3%
compared to December 2023. The year-over-year uplift was driven by multi-unit housing starts, which
increased by 14.7%, but was partially offset by a 2.9% decrease in single-unit starts. Despite a strong
overall increase, demand for Canadian housing continues to outpace growth in supply, which has been
impacted by increased costs of materials, labor supply challenges and expensive construction
financing.
The value of authorized building permits rebounded from recent December 2023 lows, growing
month over month by 13.5% in January 2024. On a year-over-year basis, the value of authorizedbuilding permits increased by 4.8% and saw strong growth in both the residential and non-residential
categories.

Seasonally adjusted, areas 10,000+
Sources: Canada Mortgage and Housing Corporation, Statistics Canada

18

Canadian Housing Indicators
Housing Starts
in thousands
350

Value of Authorized Building Permits
Single-Detached

Multi-Unit

Total

6-Month Moving Averagein millions
(CAD)

$12.0

250

$10.0

200

$8.0

150

$6.0

100

$4.0

50

$2.0

Dec '15

Dec '16

Dec '17

Dec '18

Dec '19

Dec '20

Dec '21

Dec '22

Nonresidential

Total

6-Month Moving Average

$14.0

300

0
Dec '14

Residential

Dec '23‘23$0.0
Dec '14

Dec '15

Dec '16

Dec '17

Dec '18

Dec '19

Dec '20

Dec '21

Dec '22‘23
Dec '23

Seasonally adjusted, areas 10,000+
Source: Canadian Real Estate Association (CREA)

19

Canadian Housing Market – Existing Prices
Housing prices declined in Q1 2023, showed signs of a rebound in Q2 and Q3, and abruptly fell once again in Q4. In February
2024, the MLS Home Price Index (HPI) Benchmark Price increased 1.2% year-over-year and remained in-line with January 2024
figures, ending a streak of five consecutive monthly declines. The prices of single family, one-story and two-story homes,
townhouses and apartments each experienced similar trends throughout 2023. One-story and two-story homes experienced thelargest year-over-year change in February 2024, with prices increasing by 2.4% and 1.9%, respectively.
The recent decline in Canadian home prices can be largely attributed to high mortgage rates negatively impacting consumer buying
power. However, despite an uncertain economic environment, demand for housing remains high and prices continue to hold at highlevels.
MLS HPI Benchmark Price (YoY % Change)
40.00%
30.00%
20.00%

February2024

10.00%

1.2%

0.00%-10.00%-20.00%Dec ’14

Dec ’15

Dec ’16

Seasonally adjusted, areas 10,000+
Source: Canadian Real Estate Association (CREA)

Dec ’17

Dec ’18

Dec ’19

Dec ’20

Dec ’21

Dec ’22

Dec ’23
20

Relevant Kroll Building
Products ExperienceKroll’s Industrials Investment Banking Practice Advised
Fleetwood Aluminum Products on Its Sale
Modern Door and Window Manufacturer for the Luxury Residential Market
Financial Advisor

has been acquired by

Financial advisor to Fleetwood
Aluminum Products

 A family-owned business since 1961, Fleetwood Aluminum
Products (“Fleetwood”) designs and manufactures high-quality
doors and windows for luxury homes with a core specialty inwindow walls. The company’s exceptionally high-quality productofferings are fully customizable and feature modern designs,
sleek hardware and precision locking and rolling systems.
 The company is headquartered in Corona, CA, and operates a
200,000 square-foot manufacturing facility with approximately
350 employees.
 A network of exclusive Fleetwood dealers partners withhomebuilders and architects to offer the industry-leading
products to homeowners throughout North America“Kroll provided unparalleled guidance anddedication throughout the deal process. Being afamily-owned and operated manufacturer since1961, we were determined to find the right buyer
for the family and Fleetwood. Kroll’s resources andexpertise allowed us to find the perfect fit with
Masonite. We could not be happier with theoutcome, and it was only possible with Kroll as ourpartner.”– Gary Gumbleton, Fleetwood CEO

Select Kroll Transactions:
Building Products & Construction Materials
Sell Side Advisor

Sell Side Advisor

Sell Side Advisor

has been acquired byhas been acquired by

Sell Side Advisor

Sell Side Advisor

has been acquired byhas been acquired byhas been acquired byhas been acquired by

Capital Raise

Capital Raise

has completed a refinancing
withhas completed a senior debt
recapitalization withhas been acquired bya portfolio company ofhas been acquired by

Sell Side Advisor

has been acquired byhas been acquired by

Sell Side Advisor

Sell Side Advisor

a portfolio company ofa portfolio company ofSell Side Advisor

Sell Side Advisor

a portfolio company of

23

For more information, please contact:

Steve Burt
Global Head of M&A
Advisory
Chicago+1 312-697-4620
steve.burt@kroll.com

David Althoff
Global Head of Diversified
Industrials M&A
Chicago+1 312-697-4625
david.althoff@kroll.com

Jeffrey McNamara
Managing Director,
Diversified Industrials M&A
Chicago+1 312-697-4638
jeffrey.mcnamara@kroll.com

Devin Kennealy

Stephanie Lau

Isabel Aglikin

Director,
Canadian M&A Advisory

Director,
Canadian M&A Advisory

Vice President,
Diversified Industrials M&A

TorontoToronto+1 416-361-6749+1 416-361-6761

devin.kennealy@kroll.com

stephanie.lau@kroll.com

Chicago+1 312-697-4531
isabel.aglikin@kroll.com

Dr. Howard E. Johnson
Managing Director,
Canadian M&A Advisory
Toronto+1 416-597-4500
howard.johnson@kroll.com

A b o ut K r o l l
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