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:
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).
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.
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.
“The worse-than-anticipated housing downturn, combined with systematic weakening of the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers,” said David Seiders of the Washington, DC-based NAHB. “It’s now clear that we have entered what we anticipate will be a mild recession, running through the first half of this year, and there are substantial downside risks to this economic scenario.”
Seiders said he has adjusted the NAHB’s housing forecast to indicate continuing downward movement in housing starts through the end of 2008, bringing the decline for the year to 30%. Previous forecasts had predicted a drop of 27%.
“This change in our forecast indicates that, barring immediate action by Congress to stimulate housing and the economy, the housing sector will continue to be a serious drag on economic growth until the beginning of 2009,” Seiders said.
To guard against a longer and deeper downturn, Seiders called on Congress to take steps to stimulate the economy through actions specifically targeted at improving the ailing housing market – such as a temporary home buyer tax credit, modernization of the Federal Housing Administration and oversight reform for the housing-related government sponsored enterprises.
“Stopping the downward trend in housing prices is the key to bolstering consumer confidence as well as mortgage credit quality, and a temporary home buyer tax credit is the best way to do that,” he said.
Industry Stocks Fall Despite Overall Rally
The staggering housing market negatively impacted stocks connected with the kitchen and bath industry in April, despite other factors that served to lift the rest of Wall Street higher.
The index of 52 key stocks of building products manufacturers, distributors, retailers, home builders and e-commerce enterprises – as tracked in Kitchen & Bath Design News’ exclusive monthly Stock Index – plunged 120.37 points, or 4.79%, to close the trading period from
April 4 through May 5 at 2392.41. In sharp contrast, the Dow Jones Industrial Average gained 360.12 points, or 2.86%, ending the month-long trading period at 12969.54, while the Nasdaq Composite Index rose 93.14 points, or 3.93%, to close at 2464.12 (see Market Diary, below). Declining stocks outpaced advancers by a 26-16 margin.
Top gainers for the period included Beazer Homes, Pentair and Illinois Tool Works. Whirlpool and Centex Corp. were among the greatest losers.