Housing Market Trends and Their Impact on Transportation Supply Chains
The latest Transportation Insider from the Supply Chain & Logistics Services investment banking team at Brown Gibbons Lang & Company (BGL) examines the factors that will lead transportation service providers (TSPs) to broaden their service profile and modal approach, how government mandates will impact service providers, and the opportunities that exist for the domestic transportation sector.
The excerpt below takes a closer look at how new home construction trends impact the transportation sector.
New Home Starts Drive Demand for Transportation Services
In addition to shifting consumer purchasing preferences, the affordability of a new home, which is reflected in housing starts, has an outsized impact on transportation markets. It takes roughly 70 truckloads of freight per new home built—a huge amount of capacity demand for TSPs. Freight shipped to a new home build includes goods from all sectors of the economy, ranging from raw materials, aggregates, and heavy-duty machinery to white goods, furniture, fixtures, and consumables.
Moreover, these goods impact all parts of the supply chain, spanning from raw material inputs into manufacturing processes to finished goods required for home builds. Not only are there many truckloads of materials that need to travel to new home sites, but this process also involves multiple modes of trucking, including flatbeds transporting machinery and lumber, dry vans carrying flooring and windows, and last-mile providers in straight trucks transporting goods like furniture.
In addition to these over-the-road transportation service providers, other TSPs are involved in the coordination, transloading, storage, and, in some instances, sub-assembly or other value-added services that are dependent on consumer and industrial demand for goods.
Exhibit 4 illustrates the new home permits, starts and completions over the past five years, with a noticeable decline in new home starts for the past two years. A longer-term view of new housing starts (Exhibit 5) shows the total number of units started still lags the level achieved before the 2007 – 2009 financial recession.
![Housing Picture 2](https://www.bglco.com/wp-content/uploads/2024/08/Housing-Picture-2.png)
![Housing Picture 3](https://www.bglco.com/wp-content/uploads/2024/08/Housing-Picture-3-1.png)
Today’s inflated interest rate environment (Exhibit 6) exacerbates the housing shortage and its corresponding impact on transportation and logistics markets, as interest rates directly impact mortgage rates and the affordability of a new home, which in turn causes depressed levels of new home purchases. As long as the high- interest rate environment continues into the foreseeable future, we expect a continuation of soft demand to reduce interest in new home builds and negatively impact capacity demand for TSPs. Additionally, the lingering higher levels of inflation—as depicted by the Consumer Price Index—continue to curtail consumer spending.
![Housing Market](https://www.bglco.com/wp-content/uploads/2024/08/Housing-Picture-4.png)
For a more in-depth report on the transportation market, we recommend downloading the full 16-page report that analyzes more potential trends and opportunities in the TSP space.
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Led by Craig M. Decker, BGL’s Supply Chain & Logistics Services team understands the challenges in the sector and helps clients to make the most of opportunities in the current marketplace. Please reach out via our contact form to learn more about our record of client success.