Opportunity knocks for the window and door industry: the window and door industry has ridden the wave of new home construction to a state of success. Now it must switch gears and follow a new path to sustained growth.

In the face of a decline in new home construction, window and door manufacturers look to different avenues to keep business going strong. The immediate future of the industry will likely be marked by new trends in material usage and design, along with an overall shift to the remodeling market.

"Over the past number of years, amenities in windows and doors have been leading the market," says Jeffrey Lowinski, acting president of the Window and Door Manufacturers Assn. "The marketplace--almost all manufacturers--is now manufacturing high-end, high-quality, high-performing windows."

The average consumers want more out of their windows and doors. Energy efficiency and increased performance are high on the list of consumer demands. Manufacturers understand those demands and are trying to fulfill customer expectations.

"The product in general that is sold and produced in the marketplace today is far better, energy wise and performance wise, than it was five to ten years ago," adds Lowinski. "It's the enhanced amenities: interior finish, main entry exterior, pre-finished interior in any of a variety of different color or stain finishes, decorative glass and glazing, and energy efficient products."

Michael Carliner, economist for the National Association of Home Builders, concurs, saying, "With boomers still dominating the new home market, but getting older, there is more demand for one-story homes with tow maintenance and more emphasis on high-quality amenities rather than more space."

The housing market reached a record high in 2005 with 2.073 million total housing starts, according to the NAHB Research Center's annual Builder Practices Survey. However, according to the report, housing activity is down for 2006 and is projected to continue decreasing into 2007.

"We are clearly stowing from what was a record year in 2005," says Carliner. "I think that it is not about to reverse, and we will be declining into 2007."

Others concur with this assessment. According to the U.S. Industry Statistical Review and Forecast, which is based on data developed by the WDMA, the American Architectural Manufacturers Assn. and the Ducker Research Co. Inc., "The residential prime window market grew by 5.1 percent to reach 70.5 million units in 2005. As housing starts are anticipated to decline and remodeling expenditures begin to stow, the 2005 market is forecast to decline by just over 1 percent, but remain at historically high levels.

"Due to strength in residential new construction and residential remodeling activity, the residential entry door market continued to show strong growth in 2005. Entry doors will remain stable, white interior doors are expected to decline by 2 percent in 2006."

The study, Windows & Doors, by the Cleveland-based industry research firm The Freedonia Group Inc. is more optimistic. Freedonia states, "U.S. window and door demand is projected to increase 3.7 percent annually through 2009 to $32.6 billion, a deceleration from the 1999-2004 period due to a sharp drop in single-family housing completions."

Wood or the Alternatives?

In terms of material, vinyl dominates the market with wood in second place. The report by the NAHB and the AAMA shows vinyl window sales growing 8.5 percent from 2004 to 2005, white sales of wood windows declined by 2.5 percent. Aluminum windows, which come in third in terms of sales, grew 6 percent from 2004 to 2005. Fiberglass and other materials represent a small portion of sales, but show quick growth.

"Over the fast eight or nine years, vinyl has been gaining in the marketplace, largely at the expense of aluminum windows in residential and light commercial applications," Lowinski says. "Wood windows have historically been holding their own in the marketplace, but may be losing a little to the vinyl market."

"Plastic windows and doors will continue to make inroads as a replacement for both wood and metal products, with demand increasing nearly 8 percent annually," says Freedonia.

To meet the demand and changing market conditions, many window and door manufacturers are diversifying their product offerings, building up a portfolio that encompasses multiple materials.

"The industry itself is by and large minimizing the importance of framing material because there are more and more companies that are offering all or most of the material choices," says Lowinski.

"Today, it's very difficult to find a company that only manufactures wood windows. They all have aluminum, vinyl, fiberglass or some other material line," he adds.

Material sales and usage have been largely broken down regionally as of late. White wood sales have been soft in the Midwest, Kibler says, the western markets have embraced the high-end options that a wood interior product may offer. "Western architecture has a more rustic feel to it and uses more of the rustic wood species in the interior to blend in with their decor," he says.

"Many of our clients here in San Francisco like wood. It fits with the architectural character of the building we're remodeling," says Everett J. Collier, president of the National Association of the Remodeling Industry.

Switching It Up

"While the new residential market for windows and doors will be essentially flat through 2009, the improvement and repair market will grow nearly 6 percent annually," Freedonia reports.

As the housing market continues along with its cyclical downturn, those in the window and door industry are finding ways to roll with the punches. The obvious solution for most companies has been to shift their businesses more toward remodeling and replacement products. A strong base of existing homes, coupled with a decline in new home construction, means there will be a new focus on remodeling.

"We know that there is a slowdown in the housing market going on right now, and it's probably going to get worse," says Jeff Kibler, brand manager for The Peachtree Cos. "The way that we can combat that is to divert some of our resources that have been used primarily for new construction, and drive them to R&R. As the new construction market dries up, the R&R takes off, so to speak."

Homeowners seek to customize their spaces and/or make their homes attractive to potential buyers, and windows and doors play a large part in remodeling activities.

Collier says, "A window and a door are involved in just about every project that we do. If we do a kitchen, there is usually a door and some windows involved. If there is a bathroom, there is usually a good chance that there is a window or skylight involved."

In order for a company in this industry to remain viable and profitable, it must make its products adaptable to changing economic situations, says Gary Pollard, owner/sales manager of U.S. operations for Pollard Windows.

In remodeling, consumers may look for the top of the line, but they do not always realize the costs involved. More amenities mean a higher cost in construction.

Lowinski says, "People ask for some of the innovations they see out there, but those innovations are relatively expensive. There are some manufacturers that can offer [innovative products] and furnish them. However, they are expensive right now."

Dave Koester, brand manager for Weather Shield Windows and Doors, sees two distinct differences between his products for R&R and those for new home construction--the first being installation. Products created for remodeling face the inherent challenge of fitting into existing openings without disturbing the structure of the home. Companies, therefore, are beginning to create replacement windows with thinner jams that can be fitted into gaps in the wall without needing to remove siding on the outside, or drywall on the inside.

Sizing of windows and doors is the second aspect to consider with R&R versus new home products, says Koester, adding that older homes will typically require custom-sized windows and doors to fit various-size openings.

"New residential building normally says, 'Ok, window manufacturer, what are your standard sizes? I'm going to build my home around that," says Koester. "Whereas remodeling says, 'Here are the sizes that I have to work with, oh and by the way, I'm not going to take off my siding and I want minimal disturbance to the interior and exterior of my home, so how can you help me?'"

The switch to a greater focus on R&R, for Kibler, means repackaging his company's products and finding the best possible way to deliver them to the remodeling customers.

"To effectively do this, we really need to pull together and bundle all of our R&R products and sell them to the right market," Kibler says. "These are products that we've had in our portfolio in the past, but we've always sold them through our same channels of distribution, which are geared toward new construction."

For Pollard, this shift means making business and design moves like revamping one of his lines of sliding doors to include custom heights for replacement applications. Even simple changes in business strategies like this can help a company succeed in the ever-changing market, Pollard adds.

The Three E's

Energy, Efficiency, Environment. These are terms that have gained new importance in many industries recently, and the window and door market is certainly no exception.

Consumers who replace windows and doors tend to do so for a few specific reasons, namely in hopes of improving the energy efficiency of their home, says Koester. The desire to keep energy costs down has always been somewhat important, he adds, but "in the last couple of years, it has just propelled itself to one of the first things that a consumer asks about."

According to Kibler, people are becoming more and more knowledgeable about the products that are going into their homes, and programs like Energy Star have done a good job of educating consumers about the efficiency of their windows and doors. Where terms like R-value, E-value and solar heat gain coefficient may have confused consumers in the past, those in the market for windows and doors today are much more likely to approach manufacturers with a healthy knowledge of product options.

The ability to tell consumers that a product will give them a specific amount of money in energy savings each month has become increasingly important for manufacturers, according to Koester.

"Studies say that someone will move every six to seven years," Koester says. "And to be able to go to a prospective buyer and say, 'By the way, I've got super performing, energy-efficient glass in this home that is going to save you on energy bills,' there's a quantifiable payback, not only on the energy that they have saved, but the resale value of their home."

This push to save money on heating bills has meant good news for the battle that wood-based products have been fighting against the emergence of vinyl and alternative materials, says Pollard.

"Wood is a natural insulator anyway. So, what we are finding is that when you're looking at vinyl being strong in the market, stronger than wood at this time, it is more from the maintenance-free angle than on the energy efficiency angle," Pollard says. "Those in the all-vinyl window replacement market talk about triple-sealing and triple-glass, but what they don't talk about is the fact that their product isn't wood, and that wood naturally insulates against the elements."

"I think there are some interesting market dynamics going on. With sustainability, the green movement and energy efficiency, there is something to be said for the vinyl window where you can extrude it to the shape that you want, and it is very low-maintenance and will have a very long life if maintained properly," Koester says. "By the same token, you can't overlook the fact that a wood window is an excellent natural insulator and it's a renewable resource."

Wood-based products offer something for green consumers and builders, says Kathy Harkema of Pella, adding that the emphasis on sustainable design and green building has been another hot issue for the industry. Pella is a member of the U.S. Green Building Council and its windows and doors can be used in a building earning LEED certification.

"There is greater interest in what types of resources are being used today. People are asking more and more about the amount of recycled content in products," Harkema says.

Aside from LEED ratings, building codes and other forms of certification are also having an impact on the way the industry operates. "The days of just selling a window in Portland and Jacksonville and Boston are gone," says Koester. "Every jurisdiction now has its own codes--whether it's hurricane codes or energy codes. It's just made the industry a little bit more of a science, and that is a trend that we are working with and I think we're succeeding at."

Have it Your Way

Recently, wood has found a new role within the industry. More and more, manufacturers are creating windows with a vinyl-clad exterior--providing a maintenance-free and weather-proof option--and a wood interior--giving the home more design options. Manufacturers today are offering more wood options for the interior to help high-end designers match the species of wood on the window and door to the species used in the home's floors or cabinetry.

"For instance, you might have a library or a study that has oak bookshelves or oak flooring, and then we come in with oak windows to match. Alder cabinets in the kitchen can be matched to an alder sliding patio door and alder windows," Koester says. "So, with the various wood species that are offered, we can really let the consumer, builder, or in many cases now, the architect or designer, put their own fingerprint on a project."

Many manufacturers note the level of customization that is now available for windows and doors as an important design trend hitting the industry. Consumers or builders not only can choose a wood species, but can also personalize the grille pattern, size and color of the vinyl exterior.

Harkema says that more homeowners are also opting for custom hardware on their windows and doors--looking to match with hardware throughout the home.

"There is more of a coordinated emphasis and generally more focus on different styles of hardware. People are really accessorizing their windows," Harkema says. "Rather than a basic, they are becoming a more fashionable part of the home--a focal point. People can coordinate the hardware on their windows with their patio doors and entry doors, and then extend that to the same tones that they are using with faucets and lighting fixtures."

Shipments of Doors
(millions of units)
* forecasted

Residential Entry **           2004    2005     2006 *

  Steel                        10.0    10.0      9.7
  Wood                          2.0     1.7      1.5
  Fiberglass                    2.5     3.5      3.9
Subtotal                       14.5    15.2     15.1

Residential Interior ***       2004    2005     2006 *

  Wood                         61.7    65.5     64.2
  Other                         2.6     2.0      2.0
Subtotal                       64.3    67.5     66.2

Nonresidential Entry           2004    2005     2006 *

  Steel                        1.75     1.7      1.8
  Aluminum                     1.15     1.3      1.4
  Wood                          0.2     0.2      0.2
  Other                         0.1     0.1      0.1
Subtotal                        3.2     3.3      3.5

Nonresidential Interior ***    2004    2005     2006 *

  Steel                         2.3     2.5      2.5
  Aluminum                      1.7     2.2      2.3
  Wood                          3.2     3.3      3.6
  Other                         0.6     0.2      0.2
Subtotal                        7.8     8.2      8.6

** Excludes patio-designated units.

*** Interior door volume includes both passage and closet/bifold.
Volume is counted by individual leaf, thus a single bifold door
includes two units while a double bifold includes four units.

Source: WDMA, AAMA and Ducker Research Co. Inc.

Shipments of Prime Windows
(millions of units)

* forecasted

New Construction       2004     2005    2006 *

  Wood                  9.5      9.2      8.3
  Aluminum              5.9      6.5      6.0
  Vinyl                15.2     17.4     16.6
  Fiberglass            0.6      0.8      0.8
  Other                 0.2      0.2      0.3
Subtotal               31.4     34.1     32.0

Remodeling &
Replacement            2004     2005    2006 *

  Wood                 10.3     10.0     10.1
  Aluminum              2.4      2.4      2.4
  Vinyl                22.2     23.2     24.2
  Fiberglass            0.3      0.4      0.4
  Other                 0.5      0.5      0.5
Subtotal               35.7     36.5     37.6

Total Construction     2004     2005    2006 *

  Wood                 19.7     19.2     18.4
  Aluminum              8.3      8.8      8.4
  Vinyl                37.4     40.6     40.8
  Fiberglass            0.9      1.1      1.2
  Other                 0.7      0.8      0.8
Subtotal               67       70.5     69.6

Source: WDMA, AAMA and Ducker Research Co. Inc.

U.S. Housing Forecast
(in thousands)

                          2003    2004    2005    2006    2007

Total Housing Starts     1,854   1,950   2,073   1,913   1,805
Single Family            1,505   1,604   1,179   1,568   1,480
Multifamily                349     345     354     345     325
New Single-Family
Sales                    1,091   1,201   1,280   1,134   1,086
Existing Single-Family
Home Sales               5,443   5,912   6,170   5,746   5,460
Manufactured Home
Shipments                  131     130     148     141     132

Source: National Association of Home Builders
Research Center annual Builder Practices Survey

U.S. Window & Door Demand
(in million dollars)

Item             1999      2004      2009      2014

Total Demand    21,160    27,100    32,550    40,260
  Wood           9,025    11,320    11,950    13,730
  Metal          9,065    10,110    12,320    14,910
  Plastic        3,070     5,670     8,280    11,620
Net Imports        180     1,160     1,630     2,580
Shipments       20,980    25,940    30,920    37,680

                        %
                 Annual Growth

Item            04/99     09/04

Total Demand      5.1      3.7
  Wood            4.6      1.1
  Metal           2.2      4.0
  Plastic        13.1      7.9
Net Imports      45.2      7.0
Shipments         4.3      3.6

Source: The Freedonia Group Inc. (Cleveland)