Market Shows Uptick, But Challenges Remain

The nation’s housing market continues on its slow, unsteady path toward recovery, with the spring home-buying season expected to provide a boost to both sales and new residential construction, analysts said last month. Among the key statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

“Significant uncertainties” among both home builders and buyers continue to weigh down the rate of new residential construction, although some builders are cautiously beginning to re-stock their extremely thin inventories of new homes in anticipation of gradual improvement in consumer demand as the economy slowly inches toward recovery, the National Association of Home Builders said last month. The Washington, DC-based NAHB issued that analysis in the wake of Commerce Dept. reports that recent gains in nationwide housing starts are being mirrored by improvements in building permit issuance. “While builders continue to experience a great number of challenges with regard to competition from foreclosed and short-sale properties, low appraisal values and tight credit conditions, they have noted slight improvements in interest among qualified buyers, and they need to be ready to meet the demand as it materializes,” said NAHB Chief Economist David Crowe.

Sales of existing-home sales are expected to improve, with the market for resales “clearly on a recovery path,” according to the National Association of Realtors. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain, primarily because some buyers are finding it too difficult to obtain a mortgage,” said Lawrence Yun, chief economist for the Washington, DC-based NAR. Yun noted that problems in the credit market continue to hamstring home sales and a more robust housing recovery. “Although home sales are coming back without a federal stimulus, sales would be stronger if mortgage lending would return to the normal,” he observed.

Demand for green building materials is projected to expand 13% annually, to $71.1 billion in 2015, slightly outpacing the growth of building construction expenditures over that period as green materials continue to account for an increasing share of materials used, according to the Freedonia Group, a Cleveland, OH-based market research firm. While greater availability, environmental concerns and more stringent regulatory or building code standards will support gains, the most important driver for demand will be an expected rebound in the construction market, industry researchers said. Among the products expected to post significant gains are water-efficient plumbing fixtures and fittings, energy-efficient lighting fixtures and green floor coverings.

Sales of kitchen cabinets and bathroom vanities declined again in March, 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 2.9% for the month, compared to March of 2010. Sales of stock cabinets declined 9.6%, while semi-custom sales increased 5.3% and custom cabinet sales slid 10.4%, the KCMA reported.

Market Analysis

Remodeling Growth Seen Tepid As Concerns Linger Over State of Economy

Cambridge, MA — A still-stalled housing recovery and concern over the pace of economic growth nationally are likely to generate only modest gains in home improvement spending this year, according to the Leading Indicator of Remodeling Activity (LIRA),” released last month by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

The LIRA projects annual remodeling growth slowing throughout the year, with spending up only 0.2% in 2011.

“Given all of the economic uncertainty that we’re seeing nationally, the home improvement recovery is expected to be rocky,” said Eric Belsky, managing director of the Joint Center. “Spending patterns through the remainder of the year are expected to reflect recent volatility in the housing market.” 

According to Kermit Baker, director of the Remodeling Futures Program at the Joint Center, “recent softness in the housing market and continued pessimism among remodeling contractors point to a slowdown in the remodeling market toward the end of the year.”