Homebuilders are all smiles as the housing recovery continues to strengthen. The same is true of fireplace and venting manufacturers, many of whom rely on home building for a significant portion of their sales. There’s still a long way to go before we reach average sales levels, but that means we should have steady growth over the next few years.

Single family housing starts topped 1,715,800 in 2005, but that was the peak year; it was all downhill from there until 2012. Starts finally bottomed out in 2011 at 434,000, a dramatic decline of 75 percent from the record 2005 level.

In 2012, we began the upward climb back up; single-family housing starts increased almost 24 percent over those of the prior year. That momentum continued into 2013, with an increase of 16 percent, to an estimated 621,000 units. However, those encouraging results still represent only 36 percent of the 2005 high water mark. Single-family housing starts still have a long way to go.

The forecast from the National Association of Home Builders (NAHB) indicates single-family housing starts will be up 32 percent in 2014, to 820,000 units, and they will increase another 41 percent in 2015, to 1,157,000 starts. At that point we will still be shy of 2005 starts by more than 23 percent.

“We expected solid numbers through 2013 for single-family growth,” says Robert Denk, senior economist for the NAHB, “and we expect solid growth again in 2014. In 2015 we expect to cross the one million mark, giving both 2014 and 2015 more solid growth and a solid recovery. We’re now about halfway back to what seems like normal. We could even be close to 1.3 to 1.4 million single family housing starts by the end of 2015.”

There are two critical factors contributing to the housing comeback, according to Denk. “First of all is pent up demand,” he says. “Even though the housing market collapsed in 2007 through 2009, the population growth didn’t stop. There are a lot of people in their 20s and 30s in the housing formation age, and a lot of people moving into their 30s and 40s and into the trade-up buyers age.

“We’re talking about five or six years when we were building just a fraction of the normal number of single-family homes. But none of those demands stopped. So we have five or six years of pent-up demand.

“Then, in the beginning of 2012, we saw prices really bottom out. Nationally, from 2006 to early 2009 prices declined by 33 percent, and dropped another few percentage points in 2011 before starting to go back up in 2012. That’s what turned pent-up demand into realized demand. As prices began to turn up again, it took the fear out of home buying again. It was safe to get back into the market.

“We can talk about consumer confidence and monetary policies, but these two things, pent-up demand and the return of increasing home prices, are really the two key drivers.”

David Crowe, chief economist of the NAHB, adds another factor to the association’s optimism regarding new-home construction.

“We have a very low inventory of existing homes on the market,” he says. “So we have a strong need for homebuilding.”

“Through the boom and bust for new housing, the lower-priced half of the market had higher and lower amplitudes – bigger swings – than the upper half,” says Denk. “When the bust came, it was the lower half of the market that really took the hit. What we’re seeing now is that things are getting back to normal, and the lower half of the housing market is coming back.”

Gas and wood fireplace sales have tracked new single-family home construction activity fairly closely. The peak year for fireplace sales was 2005, with 1,513,799 total units shipped. As with new home construction, fireplace sales dropped steadily through 2011, with shipments that year at only 360,838 units, a 76 percentage drop from 2005.

Finally, in 2012, there was a four percent increase, and through the fourth quarter of 2013, gas and wood fireplace shipment numbers were up 31 percent.

“Anywhere you look there’s continued optimism from homebuilders,” says Becky Scribner, Hearth & Home Technologies’ (HHT) director of Brand Marketing for Heat & Glo and Heatilator. “With many builders trying new ways to differentiate themselves from their competition, we’re seeing a trend toward more modern looks and outdoor models. Builders are more willing to spend more to differentiate themselves.”

To meet that trend, HHT introduced its new Revo series of gas fireplaces, only seven in. deep that can be mounted on the wall. Also new for builders is an entry-level price-point Slimline Fusion gas fireplace that can be converted from traditional to modern even after installation. HHT is also expanding its electric fireplace line after seeing more interest from builders.

Innovative Hearth Products also has noticed that builders are trying to differentiate themselves.

“The top 10 homebuilders are dollar driven, and most will continue with builder boxes,” says Glenn Thomson, vice president of Sales and Marketing, “but most others in the top 25 are coming back, trying to set themselves apart with step-up fireplace models including more features and options.”

Thomson says the incidents of fireplaces going into new single-family homes has dropped over the last 10 years, but more homebuilders are now installing fireplaces as a standard feature.

“For the big volume homebuilders, fireplaces as a standard feature recently were down in the low 40 percent, while in the 1990s it was 50 percent. But with the custom builder and the step-up buyer, the incidents of fireplaces did not decline at all. Now they are looking at more expensive models.”

The U.S. Census Bureau reports that 48 percent of single-family homes sold in 2012 included one fireplace, and five percent included two or more fireplaces.

Ed. Note: That figure includes both new and previously-owned homes.

“Home builders are starting to be more conscious of our products,” Thomson adds. “They want different looks and cosmetics than they did 10 to 15 years ago. We’re seeing more and more movement to less traditional looking fireplaces, cleaner-faced with contemporary media rather than typical logs. And linear models are growing with the upper tier of builders for upgraded homes.”

“We’re seeing all fireplace categories up for us with homebuilders,” says Jess Baldwin, senior vice president of Sales and Customer Service for Vermont Castings Group. “Direct-vent models are doing well, but vent-free products are doing phenomenally well.”

Addressing low-cost builder box models, Baldwin points out that the average sales price of the industry’s direct-vent gas fireplaces has risen steadily over the last three years, indicating more step-up models and fewer builder boxes are being sold.

“Tract homebuilders still want the cheapest they can buy,” he says, “but custom home builders and more informed consumers are increasingly stepping up to higher-priced, more-featured models.”

Baldwin also says that linear models are becoming more popular with homebuilders, particularly for higher-end homes.

“Linear is growing significantly,” he says. “It’s mainstream now and here to stay.” He also says that interest in electric fireplaces continues to increase with homebuilders and consumers, especially for multi-family homes, townhouses and condos.

“The current generation wants to live downtown, walk to work and use mass transit, but they still want the ambiance of a fireplace, and electric models meet that need.”

“Some builders want to be Green, others want to be ‘design-ey’ and some just want cheap, but most are now more open to better fireplaces,” according to Stephen Schroeter, senior vice president of Sales and Marketing for Napoleon Fireplaces. He says the company’s fireplace sales are up “dramatically,” especially sales in the U.S. earlier this year.

“We’re seeing a slow trickle to linear models in new homes, but most homebuilders don’t want to change, and they rely on price. It’s the custom homebuilders who want to be unique with new set-up fireplaces.”

Napoleon is quite strong with Canadian homebuilders, says Schroeter, new home construction there has been “pretty steady” after an early decline in 2013. Similar to the U.S., home inventories remain low in Canada, and Schroeter forecasts an improving market in Canada for 2014, especially in Ontario.

Napoleon recently introduced three new, more economical gas fireplaces for the builder market. The Napoleon B30, B35 and B42 models are clean- faced fireplaces with crushed glass ember beds and an improved flame.

Nick Bauer, chief operating officer for Empire Comfort Systems, says his company is the “new guy on the block” when it comes to fireplaces for homebuilders. “We added builder models to our line about three to five years ago,” he says, “and we’re seeing good growth; recently, we’re up substantially.”

Builder-box models were always the majority of fireplaces sold to homebuilders, says Bauer, because there were more tract homes built.

“But now builders are willing to step up from builder boxes in an effort to differentiate themselves. Fireplaces used to be installed in 60 or 70 percent of homes, and now it’s about 50 percent,” he says. “A fireplace was one of the easiest costs for the homebuyer to get rid of when the wife wanted a nicer kitchen. That rate of fireplace incidents will increase, and we also see a recovery from the really cheap fireplaces.”

Exhibiting at the recent NAHB show, Bauer was surprised that the majority of builders were mostly interested in linear fireplaces. “Probably 80 percent of them buy builder boxes, but they wanted to talk linear.”

Fireplace manufacturers are not the only hearth products manufacturers relying heavily on sales for new home construction. Many venting manufacturers have strong sales in B-vent for gas water heaters and gas furnaces, and Class A chimney and direct-vent for fireplaces.

HVAC sales at M&G DuraVent are up by “double digits” with its gas venting products up 20 to 30 percent, according to Todd Lampey, vice president of Distributor Sales. Last May the U.S. Department of Energy (DOE) delayed its requirement for 90-percent minimum efficiency gas furnaces until “probably 2015,” he says, but DuraVent is ready with its Poly Pro polypropylene venting for high efficiency gas furnaces and boilers.

“Right now Poly Pro is stronger in Canada where there are restrictions on PVC venting,” he says. “Our sales there are doubling every year.”

DuraVent also is offering 10 and 12-in. B-vent for the new, longer, linear gas fireplaces now available. With increasingly tighter new homes, the company is offering new outside air systems for wood- and pellet-burning.

New home construction finally is coming back strong. Fortunately, it’s bringing strong new sales to many hearth products manufacturers, and to some of their dealers. There’s great potential in the next few years.