Housing Seen ‘Finding More Stable Ground’

Economic indicators continue to provide evidence that the worst of the housing market downturn may be over, but the road to recovery will be long and pockmarked. 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

The latest government-issued housing data indicates that the key single-family home production sector “is gradually finding more stable ground,” particularly in light of ongoing credit issues and poor weather conditions, David Crowe, chief economist for the National Association of Home Builders reported last month.

Sounding an optimistic note, Crowe said that the very thin inventory of new homes currently on the market, coupled with the pent-up demand from three-plus years of low household formations (primarily among echo-boomers) and excellent affordability conditions “will likely provide the platform” for a 25% gain in new-home construction and a 20% gain in new-home sales this year over 2009.

While the combined pace of single- and multi-family housing starts declined in the most recent numbers, the decline was mostly due to a precipitous dip in multi-family starts, according to the Washington, DC-based NAHB. In contrast, single-family starts were virtually even with last year’s numbers, the trade association added.

Existing-Home Sales

Although sales of existing homes have been higher than year-ago levels for eight straight months, and home prices are considered far more stable compared to the past few years, the housing recovery is nevertheless “fragile at the moment,” according to the chief economist for the National Association of Realtors (NAR).

According to Lawrence Yun, chief economist for the Washington, DC-based NAR, “the key test for a durable recovery” will actually be evidenced once the numbers are counted for resales resulting in part from the April 30 tax-credit deadline, a particular incentive for first-time buyers.

“If we see a surge in home buying comparable to last fall in the months leading up to the tax credit deadline, then enough inventory should be absorbed to ensure a broad, [wide-ranging] home-price stabilization,” Yun observed.

He further added that recent widespread storms may have actually masked underlying demand and therefore negatively impacted recent sales result reports.

Cabinet & Vanity Sales

Early-2010 figures continue to provide significant evidence that the long tailspin in sales of kitchen cabinets and bathroom vanities may very well be abating, with recent monthly sales declines far smaller than any time over the past two years, the Kitchen Cabinet Manufacturers Association (KCMA) 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 only 3.1% in February, compared to February of 2009. Sales of stock cabinets fell 3.6% while semi-custom sales rose 0.5% and custom cabinet sales slid 17.2%, the KCMA further reported.

While year-to-date sales through the first two months of 2010 were down 4.6% compared to the January-February period of 2009, the decline paled by comparison to the monthly declines posted during the past two years, respectively. By comparison, for example, cabinet sales for the full year of 2009 declined some 28.3% from 2008, while stock cabinet sales fell off some 24.1%, with semi-custom down 30.2%, and custom sales posting a significant 37.2% decline, the KCMA concluded.

Market Analysis

Housing Not Yet in Full Recovery Phase, Survey of Residential Architects Concludes

Washington, DC — Residential architects continue to report declining business conditions, indicating that the housing market “is not yet entering a full recovery phase,” according to the latest in a quarterly series of surveys conducted by the American Institute of Architects.

According to the AIA’s “Home Design Trends Survey” for the fourth quarter of 2009 – an initiative that focused specifically on kitchens and bathrooms – surveyed architects reported that both current billings and inquiries for new projects were down in the fourth quarter of 2009 compared to the third quarter of ’09 (see related Consumer Buying Trends).

According to Kermit Baker, chief economist for the Washington, DC-based AIA, it is still too early to draw the conclusion that the residential construction market has fully recovered. Nevertheless, Baker said, there are two encouraging signs: overall business conditions are “far better” than they were a year ago at this time, and improvement is being evidenced in the sectors that need to lead a broader improvement in the housing market – remodeling and alterations of existing homes, and at the entry-level of the new construction market.

The Home Design Trend Survey is conducted quarterly among a panel of 500 architecture firms that concentrate their practice in the residential sector.