Housing Seen Gaining Ground Through 2011

The nation's housing market is expected to witness gradual improvements in 2011 as an economic recovery takes hold and consumer confidence continues to rise, most analysts are reporting. Among the key statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

HOUSING STARTS & NEW-HOME SALES

Housing will see gradual improvements this year as the U.S. economy and job market continue to gain ground, establishing momentum that will produce greater gains in 2012, according to economists at the recent International Builders Show. "This year's spring selling season will be better than last year's," said NAHB Chief Economist David Crowe, with job growth providing a stronger stimulus in the housing market than last year's tax credits for home buyers. Crowe forecasted 575,000 single-family home starts in 2011, a 21% climb over an estimated 475,000 units started in 2010, which in turn showed a 7% gain from the 442,000 homes started in 2009. The multi-family sector will see its starts rise 16% this year to 133,000 units, with a further 53% increase in 2012. Crowe cited a rebound in consumer confidence and notes that a recent pickup in purchases for automobiles and furniture "indicates that consumers are less afraid today of losing jobs and income."

EXISTING-HOME SALES

Existing-home sales "are on an uptrend," with the pattern through the last half of 2010 "clearly showing a recovery," the National Association of Realtors said last month. "The market is getting much closer to an adequate, sustainable level," said Lawrence Yun, chief economist for the Washington, DC-based NAR. Yun said the recovery will likely continue" as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain." The latest figures peg resales at a seasonally adjusted annual rate of 5.28 million, near the volume the NAR is expecting for 2011.

APPLIANCE SHIPMENTS

Domestic shipments of major home appliances finished 2010 up 3.3% from a year earlier, amid signs of a housing and remodeling market recovery, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that 2010 appliance shipments totaled 61.49 million units, a gain over the 59.50 million units shipped during 2009. Product categories with gains included electric ovens (10%), surface cooking units (8%), food preservation equipment (8.5%) and gas cooking products (7.4%), AHAM said.

CABINET & VANITY SALES

Sales of kitchen cabinets and bathroom vanities declined in December, 2010, and were down for the full year compared to a year earlier, 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 4.1% for the full year compared to 2009. Sales of stock cabinets were down 6.7%, while semi-custom sales fell 0.5% and custom cabinet sales slid 13.2%, the KCMA reported.

Market Analysis

U.S. Remodeling Industry Seen Poised For Decade of Growth in Spending

Cambridge, MA — In the wake of the worst downturn in recent history, the U.S. home improvement industry is poised for "a new decade of growth," according to a major report released last month by the Joint Center for Housing Studies at Harvard University.

According to the study, released in mid-January, remodeling expenditures over the coming years are expected to rise at an inflation-adjusted 3.5% average annual rate, below the pace during the housing boom, but sharply recovering from the recent downturn, as both the economy and the housing market stabilize.

Remodeling, which saw a double-digit decline since its peak in 2007, is beginning to return to a more typical pattern of growth, Harvard researchers said. Market fundamentals – the number of homes in the housing stock, the age of those homes and the income gains of homeowners making improvements – all point to increases in remodeling spending, they added. 

In the next five years, the focus of remodeling spending will shift from upper-end discretionary projects to replacements and systems upgrades, according to the study.

"Lower household mobility following the housing market crash means that, in the coming years, homeowners will increasingly focus on improvements with longer paybacks, particularly energy-efficient retrofits," said Kermit Baker, director of the Remodeling Futures Program at the Joint Center. "Also, a slowing of migration to traditionally fast-growing Sunbelt metro areas means that, at least temporarily, more remodeling spending will remain in older, slower-growing areas in the Rustbelt and in California."

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