The housing market continues to work its way through its unexpectedly steep, 18-month slump, while the residential remodeling sector – impacted by the housing decline – is nevertheless faring better than new construction, according to the latest economic and industry indicators. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:
Single-family builders are reporting that improving affordability and a large selection of homes on the market are helping draw more potential buyers to model homes, the National Association of Home Builders said last month. However, until that translates to higher sales and lower inventories, “builders are keeping the brakes on new construction,” observed David Seiders, chief economist for the Washington, DC-based NAHB. Single-family housing starts declined for a tenth consecutive month in January, to their lowest rate since January of 1991. Single-family permit issuance was also at its lowest since January of 1991, the NAHB said, adding that overall permit issuance, which can be an indicator of future building activity, also declined in January to its lowest level since November of 1991.
The latest figures for existing-home sales reveal that “many potential buyers remain on the sidelines,” awaiting further cuts in interest rates and the credit crunch to filter its way out of the market, the National Association of Realtors said last month. “Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales,” said Lawrence Yun, chief economist for the Washington, DC-based NAR. Existing-home sales slipped in January and were 23.4% below the pace posted in January 2007, according to the NAR.
“As the increased limits for FHA and conventional loans are implemented, more buyers will have access to safer FHA loans and lower interest rate loans, which could lead to higher home sales later in the year,” Yun observed.
Residential Remodeling Activity
Remodeling activity showed pressure from the housing downturn during the fourth quarter of 2007, with the indexes of both current market conditions and future expectations declining from previous levels, according to the National Association of Home Builders. Nevertheless, while housing starts have fallen sharply from their peak in early 2006, the remodeling market has exhibited a much smaller decline, according to the latest in a quarterly series of NAHB Remodeling Market Indexes.
“While the housing downturn has impacted the remodeling market to some degree, it is on a much smaller scale than the rest of the market,” said NAHB Remodelers Chairman Mike Nagel. According to the NAHB, 43% of surveyed remodelers reported an increase in billing in 2007, while 25% reported that billing stayed at the same level as in 2006. With respect to 2008, 51% predicted a dollar-volume increase and 27% forecasted maintaining the same volume for the entire year. “These results suggest that while remodelers see slower conditions for the short term, the long-term prospects look good, with a remodeling market recovery by the end of 2008,” Nagel said.
Cabinet & Vanity Sales
Sales of kitchen cabinets and bath vanities declined in January 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 11.3% in January compared to January of 2007. Sales of stock cabinets declined 20.1%, while semi-custom cabinet sales slid 0.2% and custom cabinet sales fell 12.3%, the KCMA reported.
Kitchen & Bath Sector Faring Best Through Current Housing Downturn, AIA Contends
Washington, DC — Throughout the current housing downturn, which began in late 2005, some sectors within the residential construction market – including the kitchen and bath niche – have fared better than others, according to the results of a new survey.
The latest in a quarterly series of “Home Design Trends Surveys” conducted by the Washington, DC-based American Institute of Architects revealed that homes targeted to first-time buyers, as well as those targeted to younger households trading up to a larger home, are apparently the weakest sectors of the housing market (see related Consumer Buying Trends).
Only 5% of survey respondents reported that the first-time buyer market was improving in the fourth quarter of 2007, while 69% felt it was weakening, resulting in a composite score of -64 (see graph, above). The trade-up housing sector fared only slightly better, with 6% of respondents reporting it improving and 51% feeling it was weakening, for a composite score of -45.
Other major residential construction sectors – second/vacation homes, townhouses and condos, and custom and luxury homes – are all reported to be seeing “serious declines,” according to the AIA.
In contrast, the remodeling sectors – both additions and alterations to existing homes and kitchen and bath remodels – are reported as “healthy and relatively strong,” although not as strong as they were a year ago. More than one-third of the residential architects surveyed rated those sectors to be improving, with fewer than 15% rating them as weakening, the
Stocks Slide in Face Of Erosion in Housing
Stocks connected to the kitchen and bath industry slid in February, along with much of Wall Street, over concerns regarding soaring oil prices and record foreclosures wrought by continued erosion in the housing market.
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 – fell 61.82 points, or 2.44%, to close the trading period from Feb. 5 through March 5 at 2467.08. In similar fashion, the Dow Jones Industrial Average dropped 10.14 points, or 0.08%, ending the month-long trading period at 12254.99, while the Nasdaq Composite Index declined 36.76 points, or 1.59%, to close at 2272.81 (see Market Diary, right).
Declining stocks outpaced advancers by a margin of 6 to 1, with 11 stocks falling to a new annual low.
Top gainers for the period included DuPont, Electrolux and Wickes. Temple Inland and Whirlpool Corp. were among the biggest losers.