Housing, Remodeling Post Signs of Recovery

The U.S. economy, as well as the housing and remodeling markets, are apparently creeping toward a slow, unsteady recovery, based on the latest round of economic indicators. Among the key statistics and forecasts released by various government agencies, research firms and industry-related trade associations in recent weeks were the following:

With inventory levels continuously down over the past 18 months, expectations are for “broadly balanced” housing market conditions in much of the U.S. by late spring, with more areas anticipating to exhibit higher house prices, the National Association of Realtors (NAR) said last month. Strong gains in existing-home sales were the predominant pattern in most states in the fourth quarter of 2009, the Washington, DC-based NAR reported. For all of 2009, 5.16 million existing homes were sold, up 4.9% from 2008, and the first annual sales gain since 2005, the NAR concluded.

Home improvement spending continues to trend downward, but the downturn is moderating, with planned spending recovering faster for upper-income households, less-leveraged seniors and professionally installed projects as opposed to do-it-yourself projects. This is the opinion of Kermit Baker, chief economist for the Joint Center for Housing Studies at Harvard University, who recently addressed members of the Kitchen Cabinet Manufacturers Association’s (KCMA) Board of Directors. According to Baker, residential remodeling spending has fallen nearly 25% from its 2007 high – and while home spending continues to trend downward, the downturn is moderating (see related graph, right). Baker pointed out that the housing market continues to emit “conflicting signals” – both positive and negative – but noted “a housing recovery appears to be underway.” Recovery, he commented, “is a process, not a single event, and we are moving through that process now.”

The long tailspin in sales of kitchen cabinets and bathroom vanities “seems to have subsided,” with recent sales results reflecting a progression of steadily increasing volume, the Kitchen Cabinet Manufacturers Association reported last month. According to the Reston, VA-based KCMA, manufacturers participating in the association’s monthly “Trend of Business” survey reported that while cabinet sales in December of 2009 were down some 9.8% compared to the same month a year earlier, the year-over-year decline for the month of December was the lowest since November of 2007. In contrast, cabinet sales for the full year of 2009 declined 28.3% from 2008, with stock cabinet sales off 24.1%, semi-custom down 30.2%, and custom sales posting a 37.2% decline, the KCMA stated.

Domestic shipments of major home appliances began 2010 where they ended 2009, posting declines in January and February after recording significant declines for the majority of last year, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported that appliance shipments were off 6.2% for the first two months compared to January-February of 2009. However, shipment declines actually moderated in such key product categories as cooking equipment, kitchen cleanup, and food preservation – while some categories actually posted gains during the same period – suggesting that the worst of the economic and housing downturn may have concluded.

Market Analysis

Global Demand for Countertops Seen Posting Modest Annual Growth

Cleveland, OH — Global demand for countertops is projected to increase 3.3% annually, with gains boosted as countries such as Brazil, China and India continue to build large volumes of modern housing units to accommodate the needs of growing populations.

That’s the conclusion of a new study from The Freedonia Group, a Cleveland, OH-based industry research firm which said that countertop gains will also be spurred by homeowners upgrading from free-standing furniture to conventional countertops in many parts of the world.

According to Freedonia, laminate accounts for more than one-quarter of global countertop sales, with nearly 40% of those countertops sold in North America. Solid surface and natural stone countertops each comprised one-fifth of global demand, but roughly 70% of solid surface countertops are sold in the Asia/Pacific region, Freedonia said.

Engineered stone, which is primarily used in more developed countries due to its high cost, is expected to achieve the most rapid gains through 2013, albeit from a very small base, Freedonia researchers noted.

The research firm also forecast that U.S. demand for decorative tile will increase 4.4% per year through 2013, with the residential construction market generating the most rapid gains in demand. Porcelain and natural stone tiles will account for the fastest gains of all tile types through 2013, while ceramic tile will continue to account for the vast majority of total demand, Freedonia said.