Housing Continues to Sputter at Year-End

The housing market, like the overall U.S. economy, continued to sputter in the fourth quarter as the pieces for a predicted recovery sometime in 2010 gradually fall into place. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

New-home production is continuing “at a very low level,” as builders confront the challenges of a credit crunch and other housing issues, the National Association of Home Builders said last month. “Builders are being extremely cautious in their efforts to maintain a modest inventory of new homes for sale,” said Joe Robson, chairman of the Washington, DC-based NAHB, which noted that the housing market is “just embarking on a fragile recovery period.”
“The fact that builders are pulling fewer permits is an indication of the increasing uncertainty about where this market is headed,” said NAHB Chief Economist David Crowe. The inventory of new homes on the market continued downward, to the lowest inventory since November 1982, the NAHB said. However, the slower pace of sales kept the month’s supply unchanged at 7.5, the trade association noted.

Favorable conditions combined with the $8,000 tax credit for first-time home buyers continue to boost existing-home sales, although the market is still “underperforming,” the National Association of Realtors said last month. According to Lawrence Yun, chief economist for the Washington, DC-based NAR, much of the recent momentum in the market for resales has been from people responding to the first-time buyer tax credit, recently extended by Congress. First-time home buyers accounted for more than 45% of home sales during the past year, the NAR said. According to Yun, rising sales momentum needs to continue for a few additional quarters in order for the market to achieve a self-sustaining recovery. Despite gains in the stock market, “most of the 75 million home-owning families have more wealth tied to their homes,” he said. “Home values could soon turn consistently positive and help the broad base or middle class families, but we’re not there yet.”

U.S. demand for plumbing fixtures and fittings is expected to rise 1.9% annually through 2013 to a market of $10.8 billion, according to The Freedonia Group, a Cleveland, OH-based industry research firm. Market gains, said researchers, will be driven by the rebounding U.S. residential construction market. Continuing consumer interest in homes with more and larger bathrooms will also spark demand for fixtures and fittings, as will increasing consumer desire for plumbing products that reduce water use and utility bills, researchers added. Demand for fixtures is forecast to advance 2.6% per year, to $5.9 billion in 2013, while demand for fittings is projected to rise 1% per year to $4.9 billion in 2013.

Sales of kitchen cabinets and bathroom vanities fell again in September compared to the same month a year earlier, the Kitchen Cabinet Manufacturers Association said last month. According to the Reston, VA-based KCMA, manufacturers surveyed in the KCMA’s monthly “Trend of Business” survey reported that overall cabinet sales declined 22.6% in September, compared to September of 2008. Sales of stock cabinets declined 19.9% while semi-custom sales fell 25.0% and custom cabinet sales dropped 24.1%, the KCMA reported. Year-to-date sales through the first nine months of 2009 were down 30.4% compared to the January-September period of 2008, the KCMA added.

Market Analysis

Cyclical Bottom Seen for Remodeling, With Start of Recovery in 2010

Cambridge, MA — Declines in owner spending on home improvements will moderate through the first half of 2010 as the market slowly begins to recover, according to the latest indicator released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

The Joint Center’s latest “Leading Indicator of Remodeling Activity (LIRA),” released last month, suggests the remodeling industry “is turning a corner,” with annual spending levels expected to rise in the beginning of 2010, causing year-over-year declines to shrink to 8.9% by the second quarter.

“Remodeling spending by homeowners shows early signs of stabilization,” said Nicolas Retsinas, director of the Joint Center for Housing Studies. “While the housing recovery has been erratic, a strengthening economy could produce spending increases on home improvement projects by the second quarter of next year.”

According to Kermit Baker, director of the Remodeling Futures Program, some positive signs for the industry are emerging. “Favorable financing costs – for those households with access to credit – and a pickup in homes sales are producing more opportunities for home improvement projects,” Baker said.

Several factors, however, still impede remodeling growth, he observed, adding that a generally weak housing market with unstable prices, near record levels of foreclosures, and other distressed sales are discouraging households from undertaking nonessential remodeling projects.