The current macroeconomic environment has been less than kind to the housing sector. Demand was already reeling from decades-high inflation, and efforts to contain it have only ended up compounding the misery. In little over a year, the Federal Reserve approved its tenth interest-rate hike to take the Fed funds rate to a target range of 5%-5.25%.
With increasing borrowing costs, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) inched up to 6.91% by the end of May. With consumer debt surpassing $17 trillion during the first quarter of the year to hit a fresh all-time high, mortgage demand dropped to its lowest levels in three months and was accompanied by a decline in existing home sales.
Hence, it is unsurprising that between June 2022 and the end of the previous year, U.S. homeowners have lost $2.3 trillion since June, according to a new report from the real-estate brokerage Redfin.
With non-farm payrolls and private payrolls surpassing expectations to increase by 339,000 and 278,000, respectively, in May to signal persistent tightness in the labor market in a resilient economy, there are doubts about whether the Fed and major central banks around the world would be willing to pause or pivot their monetary stance.
While mortgage rates are expected to keep rising and weighing on the demand for available homes, there are between 1.5 million and 6 million fewer homes in the U.S. than there are households ready to occupy them, which is contributing to housing inflation and rent hikes. With the number of housing units per 1000 people declining over the past decade, the country is undeniably in the middle of surging homelessness.
As a result, the imperative to construct homes cheaper and faster despite labor shortages in construction jobs has been driving the fledgling but exponentially growing practice of 3-D printing them.
The technology, which dates back to the 1980s, uses computer-generated designs to create objects with a nozzle at the end of a robotic arm to extrude layer-upon layer of concrete or other materials like a soft-serve ice cream machine. In the case of 3-D printed homes, the pipe is attached to scaffolding and programmed to move in a specified shape.
3D printing uses recycled materials and uses only as much as is needed without trimming or subtracting excess materials. As a result, this additive manufacturing technique is more eco-friendly and cuts waste by 60%, thereby contributing to a circular economy without sending unused wood, concrete, or glass for window panes to landfills.
3-D printing promises to be an effective workaround to the ongoing labor shortage in the construction industry. While the machine is printing, it requires little supervision or staff on the site, which replaces on-site carpenters wielding hammers and nail guns, prevents injuries, and saves costs on workers’ compensation.
A 2018 study in the academic research publication IOP Science: Materials Science and Engineering, based in the U.K., argues that 3D printing can cut costs by at least 35%.
3-D printed homes are also suitable for effective protection against natural disasters, such as hurricanes, floods, and wildfires. In September 2022, the New York Times reported that a series of 3D-printed homes in Nacajuca, Mexico, have tolerated extreme conditions, including a 7.4-magnitude earthquake.
As a result, proponents see promise in 3D-printed homes providing homeless housing, accessory dwelling units, and rapid reconstruction in disaster zones, such as Ukraine.
Moreover, with the capability of producing complex shapes that can’t be otherwise produced during conventional construction, improvement in aesthetics and mass-customization make 3-D printed homes an architect’s delight. Although printing out a multi-story house is slightly more complicated, there are successful examples, including a 3D-printed apartment building in Germany.
Although the jury is still out on which system is comparatively superior, homebuilders use both on-site (which extrude recycled construction materials to build corduroy-patterned concrete walls right at the building site) and factory-based 3D printers to manufacture homes.
While builders in the United States have been experimenting with 3D printing for several years, a 100-house community in Georgetown, Texas, might someday be looked back on as the place which changed mass housing forever.
Lennar Corporation (LEN), the nation’s second-biggest homebuilder and construction technologies firm ICON, announced in November 2022 that they have begun construction on the 100-home Wolf Ranch development in Georgetown, Texas, with sales scheduled to begin on June 10.
According to the homebuilder's website, starting prices for three- and four-bedroom homes range from $476,000 to $566,000. Homes will range from 1,600 to 2,000 square feet.
According to ICON's CEO Jason Ballard, 3-D printed homes, whose construction costs are expected to keep declining with increasing scale, have “better design, higher strength, higher energy performance and comfort, and increased resiliency.”
If Chris Murphy, chief strategy officer for Oakland-based Mighty Buildings, is to be believed, “There is no way in 10 years we’ll be able to be building like we are today. Even if we didn’t have a massive shortage on the supply side, which we do, we don’t have the labor to continue building as we would want to today, and we have an environmental crisis.”
Given the potential of this technology, the increasing interest is evident from the fact the construction with 3D printers was one of several housing innovations on display during the Pacific Coast Builders Conference held last month in Anaheim.
Given the high growth rate and low penetration, the technology has a long runway ahead as it seeks to transform housing across the world and even beyond it, one layer at a time. Below are a few other stocks that could provide exposure to investors keen to make a long-term bet on this technology.
SSYS offers connected, polymer-based 3D printing systems, related services, consumables, and additive manufacturing (AM) solutions, mainly in Israel, the United States, Germany, Hong Kong, and Japan. The company’s offerings include 3D printers, materials, software, expert services, and on-demand parts production.
Amid unsolicited interests and advances from Nano Dimension Ltd. and 3D Systems Corporation (DDD), on May 25, SSYS announced its entry into a definitive agreement with Desktop Metal, Inc. (DM) whereby the companies will combine in an all-stock transaction valued at approximately $1.8 billion.
By combining the polymer strengths of SSYS with the complementary industrial mass production leadership of DM, the combined entity post-merger is expected to generate $1.1 billion in 2025 revenue, with significant upside potential in a total addressable market of more than $100 billion by 2032.
PRLB digitally manufactures custom prototypes and on-demand production parts, primarily from commercial-grade plastic, metal, and liquid silicone rubber. With a digital model that supports the transition from prototyping to production, the company can support developers and engineers effectively.
Headquartered in Belgium, MTLS provides software and three-dimensional (3D) printing services. Through quality, reliability, and repeatability, which form the backbone of the 3D printing industry, the company serves and transforms businesses worldwide, including Colombia, Brazil, Australia, Malaysia, China, Japan, Austria, Poland, Germany, and France.