Wayne Gorrell, owner of Gorrell Windows & Doors, in Indiana, Penn., can’t say enough good things about ARRA (the American Recovery and Reinvestment Act) and its tax credits for energy-efficient home improvements.
“It’s been a lousy few years,” Gorrell says. “So it’s been refreshing to see an uptick in orders.”
It has been a lousy few years for the residential replacement window industry, which has seen product shipments fall from a peak of 36.4 million units in 2005 to 30.2 million in 2008, according to market researcher Ducker Worldwide, in a report prepared for the American Architectural Manufacturers Association and the Window & Door Manufacturers Association.
So when ARRA was signed into law, and tax credits for energy-efficient home improvements were made available, window replacement contractors, among the more adept marketers in the home improvement industry, wasted no time getting the word out.
Previous legislation, effective in 2006 and 2007, included a subcap limiting credits for qualifying window replacements to $200. That figure for the most part failed to impress either contractors or consumers, whose response ranged from indifference to scorn. “It didn’t do much at all,” says Merv Hollander, owner of Weathertite Windows, in Girard, Ohio.
Of course, credits for 30% of the job, up to $1,500, is another matter. That size tax credit has heft, especially as applied to a window job, where the total sale is typically less than $10,000. Gorrell sees tax credits lifting industry sales by 20% to 30%. Veteran industry sales trainer Rick Grosso says of the $6 billion that tax credits are expected to add to total remodeling sales: “We should be able to do that in windows alone.” And in fact, earlier this year, big window manufacturers Andersen Windows and Simonton Windows re-hired production workers to meet expected demand, a move that Andersen’s director of marketing, Stephanie Miller, says owes at least partly to the effects of the stimulus legislation and its tax credits. Andersen, the 106-year-old Minnesota window giant, has pulled together qualifying products across all lines and sublines and will shortly launch a new brand called Eco-Excel.
Tax credits have stirred up the window industry like nothing in years. Less than a month after the legislation was signed, window replacement companies in many markets were already offering to match whatever homeowners earned in tax credits with an exact discount. Though many products qualify for stimulus tax credits, HVAC and insulation contractors often lack the marketing savvy of the window replacement companies, which live or die on daily lead flow.
But tax credits have also had another effect on the window replacement industry, one neither intended nor foreseen. They have stepped up competitive pressures by reclassifying contractors into those with qualifying windows and those without. In a market where consumers now “get more estimates, and take longer to make up their minds,” according to Jim Lett, owner of A.B.E. Doors & Windows, in Allentown, Penn., who can afford to be left behind?
For a company without a qualifying window, the damage is two-fold: your product is seen as being below the standard, and buying it won’t get anybody anything back. You’re “at a huge selling disadvantage,” says Ken Moeslein, CEO of Legacy Remodeling, in Pittsburgh. In fact, so many window companies put tax credits front and center, both in their marketing and in their sales pitch, that it’s become a “competitive necessity,” says Joe Talmon, vice president of Larmco Windows and Siding, in Columbus, Ohio.
Manufacturers with few or no products that qualify are “scrambling” — the word most often used — to respond to the .30/.30 U-factor/solar heat gain coefficient that is now the new bar in fenestration efficiency. Even Window World, based in North Wilkesboro, N.C., with its well-known $189 (base price) window, came forward with a new product, at $278, that qualifies for credits.
Moeslein believes that with so many companies pushing tax credits, the efficiencies of .30/.30 will soon be something that every window contractor will have to have. That’s when consumers will start to lose interest. “If you hear everybody talking about it, you presume everybody has it,” he says.
Others point to the long-term effect on window standards, and public attitudes about conservation and the home. “The industry will continue to move in this direction, whether there’s a tax credit or not,” says Andersen Windows' Miller. “It’s not just a fad,” says Michael Lelasher, director of operations at Cardinal Builders, in Columbus. “That’s the way the entire world is going.”