Housing Slump Still Weighing on Market

A worsening housing slump, exacerbated by the near-meltdown in the financial arena, as well as declines in consumer and home-builder confidence, continues to hamstring the entire residential construction market, including the kitchen and bath sector. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Housing Starts

Job losses, continuing problems in the finance sector and sinking home values aggravated by the wave of foreclosures are all contributing factors to a housing decline showing no signs of abating anytime soon, the National Association of Home Builders said last month. “Traffic of prospective buyers is down substantially, and consumer confidence is very low,” said NAHB Chief Economist David Seiders in the wake of reports of worsening conditions in the nation’s housing and financial markets, and continued declines in housing starts. Starts of new single-family homes fell in June to their slowest pace in 17 years, marking a decline of 64.5% from the peak of the building boom in January of 2006, according to the Washington, DC-based NAHB. Builder confidence was also reported at an all-time low.

Existing-Home Sales

Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year, according to the latest forecast by the National Association of Realtors. According to the latest forecast of the Washington, DC-based NAR, existing-home sales are expected to grow from an annual pace of 5.01 million in the second quarter of 2008 to 5.75 million in the fourth quarter. For all of 2008, existing-home sales should total 5.31 million units, and then increase 5% next year to 5.58 million units, the NAR projected. “The speed at which home prices has declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market,” observed NAR chief economist Lawrence Yun. “It’s possible that most of the price declines have already occurred in those markets.” The aggregate median existing-home price is projected to fall 6.2% this year, to $205,300, and then rise by 4.3% in 2009, to $214,100, according to the NAR.

Cabinet & Vanity Sales

Sales of kitchen cabinets and bathroom vanities, continuing to be impacted by the steep housing slump, declined sharply 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 fell 20.1% in June compared to June of 2007. Sales of stock cabinets declined 18.9%, while semi-custom cabinet sales dipped 20.0% and custom cabinet sales fell 25.5%, the KCMA reported. Year-to-date sales through the first six months of 2008 were down 14.8% compared to the January-June period of 2007, the KCMA added.

Appliance Shipments

Factory shipments of major home appliances posted a modest rise in June, gaining 3.1%, to 8.2 million units, up from 7.8 million units the same month a year ago, according to the latest figures from the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported, however, most of the June gain was in the category of room air conditioners – and, despite the monthly gain, year-to-date appliance shipments through June were still off 8.5% from the same six-month period in 2007. Year-to-date declines have been posted in virtually all appliance categories, including cooking, kitchen clean-up and food preservation products, AHAM said.

Market Analysis

Kitchen, Bath Renovation Holding Own Despite Overall Weakness in Construction