The federal departments of Agriculture (USDA) and of Housing and Urban Development (HUD) have announced upgrades to the building energy codes to be used in construction of FHA-insured single-family homes and those under USDA programs. This shift to conform to the 2021 International Energy Conservation Code (IECC) will affect the building of nearly 150,000 homes in its first year, John Burns Research and Consulting estimates. And that, in turn, could increase overall spending on insulation products by 3% to 4%.

Evercore ISI says it expects Fannie Mae and Freddie Mac to adopt the 2021 IECC as a requirement for construction on homes whose mortgages it backs. Such a move would be “all but ensuring that the vast majority of homes built in this country will adhere to the ’21 or ’24 energy code by late next year,” the stock analyst said. “This increased visibility for more insulation demand will only strengthen an already robust pricing backdrop for the insulation manufacturers and distributors.”

More insulation usage could lead to even more price hikes, Evercore/ISI wrote. But it also could lead to more product innvovation “as manufacturers and contractors seek cost-effective solutions to meeting these more stringent standards.”