Analysts Hint at Stabilization by Year End

While the housing downturn is still underway, and both the general economy and consumer confidence remain fragile, some analysts are pointing to the first hints of market stabilization taking hold by the end of 2008. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Housing Starts

The housing downswing “is still underway,” based on the latest figures for housing starts and building permits, the chief economist for the National Association of Home Builders said last month. David Seiders, top analyst for the Washington, DC-based NAHB, said the latest housing figures mirror the results of the NAHB’s surveys, “which indicate builders recognize the fundamental weakness on the demand side of the market and are taking the appropriate steps to limit new inventory.” Housing starts, last reported at a seasonally adjusted annual rate of 975,000 units, were at their lowest level since March of 1991, according to the NAHB. Single-family starts, at a rate of 674,000 units, were their lowest since January of 1991, the association added. In the meantime, sales of newly built, single-family homes fell 2.5% in May to a seasonally adjusted annual rate of 512,000 units.

Existing-Home Sales

Underlying fundamentals point to a pent-up demand for existing-home sales, which should increase from an annual pace of 5.05 million in the second quarter of 2008 to 5.83 million in the fourth quarter, the National Association of Realtors said last month. Lawrence Yun, chief economist for the Washington, DC-based NAR, predicted that existing-home sales will total 5.4 million units in 2008, and then rise 6.3%, to 5.74 million units in 2009. “Sales gains will be greatest in areas that underwent sharp price declines,” he said, though “it’s unclear what role consumer confidence will play.” After unprecedented home price declines in the first half of the year, many markets can anticipate stabilizing price trends in the second half, Yun concluded.

Residential Remodeling

More homeowners are turning to remodelers for money-saving solutions, according to the results of the latest National Association of Home Builders’ quarterly Remodeling Market Index (RMI). The latest RMI, released last month, reveals 33% of surveyed remodelers report they are increasingly being called on to improve the energy efficiency of their client’s homes. According to the survey, remodelers have installed a number of efficiency-enhancing products in recent months, including high-efficiency kitchen appliances (47%), water-saving faucets and fixtures (46%), energy-efficient windows (73%), high-efficiency HVAC systems (56%), and tankless water heaters (35%).
 
Cabinet & Vanity Sales

Mirroring the slump in the nation’s housing market, sales of kitchen cabinets and bathroom vanities declined sharply again in May 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 18.9% in May compared to May of 2007. Sales of stock cabinets plunged 20%, while semi-custom cabinet sales declined 15.9% and custom cabinet sales fell 26.5%, the KCMA reported. Year-to-date sales through the first five months of 2008 were down 12.8% compared to the January-May period of 2007, the KCMA added (see related story, boxed at right).

Market Analysis

U.S. Demand for Cabinets Seen on Rise As Usage Increases, Housing Rebounds

Cleveland, OH — U.S. demand for cabinets is being forecast to increase 3.9% per year through 2012, and more than 4% a year through 2017 – with residential cabinet demand fueled by a rebound in new housing construction, as well as design trends that lead to greater cabinet use per residence.