Market Gains Foreseen, Though Caution Rules

A gradual improvement is being forecast for housing and residential remodeling, although analysts remain cautious and point to myriad challenges that could hamstring industry growth. Among the key statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

The nation’s home builders remain “very cautious” in light of the sluggish pace of the economic recovery, as well as the “hesitancy” they are seeing among potential home buyers, the National Association of Home Builders said last month. According to the Washington, DC-based NAHB, the latest housing-start figures are “somewhat encouraging” because they suggest that single-family housing production may be finding a bottom. “Over the next several months, we expect to see some improvement in both housing starts and sales activity as buyers come forward to take advantage of the very attractive home prices, historically low mortgage rates and excellent selection that characterize today’s new-home marketplace,” said NAHB senior economist Bernard Markstein. However, he cautioned, builders continue to confront significant challenges in obtaining financing for viable new projects, “and this problem remains a formidable obstacle to economic growth.” 

The market for existing-home sales is exhibiting “uncharacteristic yet understandable swings” – largely the result of expiring (but soon-to-be-extended) government tax credits – but “only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels,” the National Association of Realtors said last month. According to the latest available numbers, existing-home sales slowed in June, but remained “at relatively elevated levels,” the Washington, DC-based NAR reported. Existing-home sales were running at an annualized rate of 5.37 million units in June, down 5.1% May, but 9.8% higher than the 4.89 million-unit pace in June 2009, the NAR said.

Domestic shipments of major home appliances continued their new pattern of advances in June, posting a 9.4% increase as the appliance market continued to exhibit signs of recovery, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that appliance shipments, at 33.6 million units, were up 4.0% through the first six months of 2010 compared to January-June of 2009. Gains were reported in such key product categories as dishwashers, refrigerators, and gas and electric ranges, ovens and surfacing cooking units, AHAM reported.

After showing signs of growth, sales of kitchen cabinets and bathroom vanities slid in June compared to the same month 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 declined 1.1% in June, compared to June of 2009. Sales of stock cabinets fell 0.9%, while semi-custom sales gained 0.2% and custom cabinet sales fell 8.9%, the KCMA reported. Year-to-date sales through the first six months of 2010 were down 0.03% compared to the January-June period of 2009, the KCMA added.

Market Analysis

Signs Pointing to Late-2010, ’11 Recovery In Spending for Home Improvements

Cambridge, MA — A recovery in home improvement spending will soon be underway, according to the Leading Indicator of Remodeling Activity, a measurement of homeowner spending released last month by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

Remodeling spending is expected to increase on an annual basis by the end of the year, and the LIRA points to growth accelerating to the double-digit range in the first quarter of 2011 (see related graph, right).

“Absent a reversal of recent economic progress, there should be a healthy upturn in home improvement activity by year-end and into next year,” said Eric Belsky, managing director of the Joint Center for Housing Studies. Homeowner optimism is bolstering a trend toward investing in the home again.

“The recovery in home improvement activity appears to be moving beyond simple replacement projects and energy retrofits to broader remodels and upgrades,” said Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies. “A wider activity base would help generate the expected growth in the quarters ahead,” Baker said.