Housing conditions, in the midst of a steep year-long decline, remained essentially unchanged as 2008 got underway in earnest, according to the latest round of key economic indicators (see related NKBA 2008 Outlook). Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:
Housing Starts & Sales
Builder confidence in the market for new single-family homes was virtually unchanged for a fourth consecutive month in January, according to the latest “Housing Market Index” produced by the National Association of Home Builders and Wells Fargo. “The HMI has held within a narrow two-point range for the past five months, indicating that builder views of housing market conditions essentially haven’t changed over that time,” said NAHB Chief Economist David Seiders. Derived from a monthly survey, the HMI measures builder perceptions of current and future single-family home sales. The survey was conducted in the wake of reports which noted that December’s seasonally adjusted annual rate of 604,000 units for new single-family home sales was 40.7% below a year ago. At the same time, a sharp reduction in the volatile multi-family sector contributed to an overall 14.2% decline in nationwide housing starts for the month to the lowest rate since May of 1991.
Existing-home sales in 2007, while down sharply from the record-setting levels of the recent past, were nevertheless the fifth-highest number on record, according to the National Association of Realtors.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 12.8% below the 6.478 million transactions recorded in 2006, to 5,652 million units last year, the Washington, DC-based NAR reported. Over the next few months, existing-home sales are expected to hold fairly steady, as indicated by pending sales activity, then rise later in the year and continue to improve in 2009, according to the latest forecast by the NAR.
Residential Remodeling Activity
Tighter credit standards and falling consumer confidence are expected to depress remodeling spending through 2008, Harvard University’s Joint Center for Housing Studies said last month. According to the latest in a series “Leading Indicator for Remodeling Activity” (LIRA) reports, homeowner spending for home improvement activity will continue to decline, falling by an annual rate of 2.6% through the third quarter of 2008. Kermit Baker, director of the Remodeling Futures Program, noted that, absent a more serious national downturn, remodeling activity is expected to see only “modest declines” in 2008.
Cabinet & Vanity Sales
Sales of kitchen cabinets and bathroom vanities, mirroring declines in housing, fell again in December of 2007 compared to the same month a year earlier, and were down for the full year, 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 14.6% in December compared to December of 2006. Sales for the full year were down 12.3%, the KCMA said. Sales of stock cabinets fell 19.8% for the year, while semi-custom cabinet sales slid 4.7% and custom cabinet sales declined 5.2%, the KCMA reported.
Solid, But Changing, Demographics Seen Boding Well for Future Housing
Cambridge, MA — The accelerating pace of household growth, together with the large number of households in their peak wealth and income years, “bodes well” for housing over the coming year, despite the steep decline now being witnessed by the housing sector.
That’s the conclusion of the Joint Center for Housing Studies at Harvard University, which noted in a recent market analysis that future construction demand “will be weighted toward luxury homes, major remodeling projects, senior housing and second homes.”
Additional demand for rental units, starter homes and first trade-up homes will come from continued immigration, along with the large number of ‘echo boomers’ moving into their peak household formation years, the Joint Center observed.
Largely as a result of a record number of new immigrants arriving in the U.S. during the 1990s, and larger numbers entering this decade, net household growth is poised to accelerate by about 2 million, to 14.6 million households by 2015. Minorities, particularly Hispanics, will account for 68% of that growth, housing analysts said. In addition, incomes and wealth stand higher for most households in real terms than ten years ago – a factor that should translate into solid growth in both new construction and remodeling spending over the next ten years compared with the last ten.
“While the baby boomers will not add many households on net over the next decade, the sheer size of this generation ensures its continued influence in the housing market,” the Joint Center said. “With their record-breaking income and wealth, the baby boomers will set the pace for second-home demand,” the Joint Center added.
Key Stocks Weather Wall Street Storm
Stocks connected to the kitchen and bath industry weathered a Wall Street storm in January, gaining ground – although just slightly – in the face of markets that plummeted amid fears of a recession.
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 – added 1.72 points, or 0.07%, to close the trading period from Jan. 4 through Feb. 5 at 2552.78. In sharp contrast, the Dow Jones Industrial Average plunged 535.05 points, or 4.18%, ending the month-long trading period at 12265.13, while the Nasdaq Composite Index declined 195.08 points, or 7.79%, to close at 2309.57 (see Market Diary, right).
Advancing stocks outpaced decliners by 30-12, with 41 stocks falling to a new annual low.
Top gainers for the period included Whirlpool Corp., Ryland Group and Mohawk Industries. Fortune Brands and Weyerhaeuser were among the greatest losers.