Housing Market Continues to Languish

No major changes have been reported in a housing market that continues to decline under the weight of an economic recession and declines in consumer confidence. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Housing Starts

Builders continued to reduce the pace of new-home construction in March amidst ongoing erosion in the overall economy and credit markets. Housing starts rose unexpectedly in April, a sign of optimism for the sluggish housing sector. [However] “builders are dramatically limiting starts of new homes in an environment of weak sales and heavy supply, ratcheting down production of single-family units to its slowest pace in 17 years,” reported Sandy Dunn, president of the National Association of Home Builders (NAHB). “Builders continue to report prospective buyers visit their model homes, but most are unwilling or unable to purchase given the downward trends in employment and home values, as well as the tightening of mortgage credit conditions,” said NAHB Chief Economist David Seiders (see related story, at right).

Exisitng-Home Sales

Little change is expected in existing-home sales over the next several months, before notable improvements take hold during the second half of the year, according to the latest forecast by the National Association of Realtors. Lawrence Yun, chief economist for the Washington, DC-based NAR, said the housing market “will come into focus” this summer. “Existing home sales could start to show a sustained increase within a few months,” Yun observed. “We’re looking for stable sales in the near term, before higher mortgage loan limits translate into sales in high-cost markets,” he said, adding the economy won’t grow in the first half, although “the combination of recent fiscal stimulus enactment and the lagged impact of monetary policy will help jump start the economy in the second half.”

Casy Polymer Demand

Demand for cast polymers, driven largely by an increasing consumer desire for engineered stone, is forecasted to increase 3.6% annually, to 265 million square feet by 2012, according to a market study by The Freedonia Group, a Cleveland, OH-based research firm (see related table at right). Solid surface materials will continue to account for the largest share of cast polymer demand, with 42% of the total in 2012, researchers said. Countertops will continue to account for the largest share of cast polymer demand, comprising 84% of the total, researchers predicted. However, solid surfacing is forecasted to have the lowest growth rate of all cast polymers, due to increased competition from such surfacing materials as engineered and natural stone, “which are seen as more high-end materials, and competition from such less expensive materials as decorative laminates and tile,” Freedonia said. Solid surface demand will benefit from increased use in non-residential applications, the research firm noted. Demand for engineered stone is seen increasing 7.0% annually, to 84 million square feet by 2012.

Cabinet & Vanity Sales

Sales of kitchen cabinets and bathroom vanities declined in March compared to March of 2007, 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 overall cabinet sales slipped 12.4% in March compared to March of 2007. Sales of stock cabinets slid 24.6%, while semi-custom cabinet sales declined 0.8% and custom cabinet sales fell 13.8%, the KCMA reported. Year-to-date sales through the first three months of 2008 were down 9.1% compared to the January-March period of 2007, the KCMA added.

Market Analysis

Housing Forecast Lowered in Face of Mild Recession, Decline in Confidence

Washington, DC — The deepening slump in the nation’s housing markets has seriously eroded consumer sentiment and pushed the economy into a mild recession, according to the chief economist for the National Association of Home Builders.