Housing Market Continues to Languish

The nation’s housing market, despite some positive fundamentals such as favorable affordability, continues to languish under the weight of consumer uncertainty and sluggish economic growth. Among the key statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

While mortgage rates remain low, and house prices are as affordable as they’ve been in a generation, the sluggish level of housing starts “is indicative of the low level of confidence that consumers have in the housing market,” the National Association of Home Builders said last month. The latest figures on single-family starts show a seasonally adjusted annual rate of less than 400,000 units, despite the fact that nationwide housing affordability during the first quarter rose to its highest level in the more than 20 years it has been measured, according to the Washington, DC-based NAHB. “Consumers have not yet reached a level of confidence that is strong enough to begin lifting the housing market,” said NAHB Chief Economist David Crowe. “The fundamentals – such as economic growth and employment – will eventually provide enough momentum to push housing forward at a healthy pace,” he said, warning that “until then, builders are unwilling to move forward.”

Existing-home sales are expected to remain on an uptrend through 2012, although the performance will be “uneven,” with mortgage constraints weighing on the market, the National Association of Realtors said last month. According to Lawrence Yun, chief economist for the Washington, DC-based NAR, existing-home sales have been underperforming by historical standards and will rise gradually – but only unevenly. “If we just hold at the first-quarter sales pace of 5.1 million (units), sales this year would rise 4%, but the remainder of the year looks better,” Yun said. He added that the NAR is forecasting 5.3 million existing-home sales this year, up from 4.9 million in 2010, with additional gains in 2012 to about 5.6 million.

Domestic shipments of major home appliances continued their downward trend in 2011, declining again in April compared to the same month a year ago, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that April appliance shipments totaled 4.93 million units, down 21.6% from the 6.29 million units shipped during April of 2010. Year-to-date shipments were off 2.1% compared to the January-April time span last year, AHAM said, adding that declines were reported in virtually all major product categories, including cooking, kitchen cleanup and food preservation appliances.

Sales of kitchen cabinets and bathroom vanities declined again in April, the Kitchen Cabinet Manufacturers Association said last month. According to the Reston, VA-based KCMA, manufacturers participating in the association’s monthly “Trend of Business” survey reported that overall cabinet sales fell 5.6% for the month, compared to April of 2010. Sales of stock cabinets declined 10.8%, while semi-custom sales increased 1.3% and custom cabinet sales slid 15.1%, the KCMA reported. Year-to-date sales through April were off 4.7% from the January-April period of 2010.

Market Analysis

Remodeling Off to ‘Rough Start’ in 2011, With Volatility Seen Likely to Continue

Cambridge, MA — 2011 has gotten off “to a rough start” for residential remodeling, with a combination of poor weather and the expiration of the energy-efficiency tax credit serving as “the major culprits” for the market’s sluggishness.

That’s the view expressed by Kermit Baker, chief economist for the Joint Center for Housing Studies at Harvard University, to attendees at the Joint Center’s recent Remodeling Futures Conference here.

According to Baker, poor weather created a slowdown in remodeling activity during the first quarter, although discretionary and professionally-installed projects “remained fairly healthy.” Discretionary project activity, which generally includes kitchen and bath remodeling, is picking up across the board, although a heavy reliance on cash funding is limiting project size, Baker said (see related pie chart, above). Distressed properties, he noted, “remain an important source of new projects” for residential remodelers.

Baker added that current remodeling indices are sending “mixed signals” for 2011, with market volatility “likely to continue.”