Market Malaise Lingers With Housing Slump

The current slump in housing continues to have a major impact on the kitchen and bath market, slowing demand and purchases of key products, including cabinets and appliances, the latest industry barometers reveal. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

New-Home Sales

Home builders continue to scale back production in an effort to contain inventories amidst ongoing market factors, “keeping many potential home buyers on the fence,” the president of the National Association of Home Builders said last month. According to NAHB president Sandy Dunn, builders are “doing what we can to restore balance to the supply-demand equation, but we need [government officials] to take action on several fronts if there’s any hope of rebuilding consumer confidence and jump-starting the economy.” The NAHB’s latest surveys “reveal that many prospective buyers are looking into a home purchase, but are unwilling or unable to make their move with conditions in the overall economy and financing arena what they are,” the association said. Single-family housing starts continued on a downward trajectory in February. At the same time, sales of new single-family homes were running nearly 30% below a year earlier and 58% below the market’s peak in July 2005.

Exisitng-Home Sales

The recent uptick in sales of existing homes is an “encouraging sign that the [housing] market is stabilizing,” the chief economist for the National Association of Realtors said last month. According to Lawrence Yun of the Washington, DC-based NAR, “we’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing. “Buyers taking advantage of higher loan limits for mortgages will unleash some pent-up demand,” Yun said, noting that “prices in many markets should go positive later this year,” as inventories of unsold homes are drawn down. Existing-home sales rose 2.9% in February, to a seasonally adjusted annual rate of 5.03 million, but remained 23.8% below the 6.60 million-unit level posted in February 2007.

Plumbing Product Demand

U.S. demand for plumbing fixtures and fittings – fueled largely by increasing applications in residential remodeling, including trends toward larger bathrooms and kitchens – is expected to rise 2.7% annually through 2011, to a total market of $11.4 billion, according to a study by a leading industry research firm (see related table, right). The study, conducted by the Cleveland, OH-based Freedonia Group, forecasted that demand for plumbing fixtures will grow 2.4% per year through 2011, to $6.15 billion. Consumer interest in higher-end fixtures will fuel demand, along with product developments aimed at adding value, the research firm said. Demand for plumbing fittings was forecasted to rise 2.9% per year through 2011, to $5.25 billion, with advances supported by product developments, the Freedonia Group said. Consumer interest in higher-end amenities will also bolster value growth, researchers added.

Cabinet & Vanity Sales

Sales of kitchen cabinets and bathroom vanities fell slightly in February 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 cabinets declined 3.7% in February compared to February of 2007. Sales of stock cabinets fell 15%, while semi-custom cabinet sales slid 8.3% and custom cabinet sales fell 2.3%, the KCMA reported. Year-to-date sales through the first two months of 2008 were off 7.4% compared to the January-February period of 2007, the KCMA added.

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