Housing Conditions Still Seen as Strong

Housing Conditions Still Seen as Strong
The nation’s housing market posted a strong year in 2005, despite some cooling over the last two months, and conditions remain ripe for a solid year in 2006, analysts said last month. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Housing Starts
The year 2005 will close as a record year for single-family housing starts, and the second-best year for total housing starts in history, the National Association of Home Builders said last month. The totals for housing starts posted in 2005 were exceeded only in 1972, when multi-family production surged, according to the Washington, DC-based NAHB. “The housing market still is fundamentally healthy,” said NAHB president Dave Wilson. Measures of housing affordability have deteriorated in recent months, “but economic fundamentals are still quite solid,” added NAHB Chief Economist David Seiders (see related story, Market Analysis, below).

Existing-Home Sales
Sales activity in the housing market for 2006 is expected to be down from last year, but nevertheless should represent the second best year in history, the National Association of Realtors forecast last month. Commenting in the wake of a decline in existing-home sales in November 2005, David Lereah, chief economist of the Washington, DC-based NAR said that market conditions are still favorable for housing, with the current slowdown amounting to “a tapping of the brakes on a hot market.” He added that the current “transition to a more normal and balanced market is a good thing.” Existing-home sales, which rose about 4.7%, to 7.10 million units last year, are likely to decline 3.7% in 2006 to 6.84 million, according to the latest NAR forecast.

Cabinet & Vanity Sales
Sales of kitchen cabinets and bath vanities increased 12% in November 2005 over sales in November 2004, 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 sales of stock cabinets rose 13.7% for the month, while semi-custom cabinet sales gained 10.2% and custom cabinet sales increased 11.2%. Year-to-date cabinet sales for the first 11 months of 2005 were up 13.3% over the same period a year ago, the KCMA added.

Appliance Shipments
Domestic shipments of major home appliances were up modestly once again in November 2005, and were running at essentially the same pace as those of the record year in 2004, the Association of Home Appliance Manufacturers reported last month. According to the Washington, DC-based AHAM, November appliance shipments totaled 5.57 million units, up 1% from the 5.52 million units shipped in November, 2004. Year-to-date shipments for the first 11 months of 2005 were pegged at 72.09 million units, 0.3% over the January-November 2004 total. Among the November gains posted were for food preservation products (+13.9%) and kitchen clean-up appliances (+4.5%), AHAM said. In contrast, shipments of cooking products posted a 9.9% decline, the association added.

Market Analysis
Nation’s Strong Housing Market Seen ‘Simmering Down’ Modestly in 2006

Washington, DC – Following strong growth over the past three years, home sales and housing production will ease back this year to around 2004’s historically “healthy” levels, according to a pair of housing industry analysts.

Striking an overall positive tone, National Association of Home Builders Chief Economist David Seiders and JP Morgan Chase Senior Economist James Glassman were largely in agreement in their forecasts for the coming year in terms of the outlook for housing and the overall economy.

The pair, who participated in an NAHB-sponsored teleconference last month, each pointed to a sound economy through 2006.

“For housing, it will be a systematic simmering down process toward more sustainable levels of sales, production and price appreciation, as opposed to a full-blown cyclical contraction,” Seiders said. “In terms of single-family sales and starts, we’ll basically be retracing the increases we saw in 2005, heading back to 2004’s very healthy levels.”

Seiders’ latest forecast envisions overall housing starts reaching 1.94 million units in 2006, down from an estimated 2.06 million units in 2005, and very close to 2004’s 1.95 million units. Single-family starts will decline in 2006 to 1.59 million from last year’s 1.71 million units, while sales of new single-family homes will ease to about 1.19 million units from last year’s record-breaking 1.27 million. Likewise, multi-family starts will slip down to 350,000 in 2006 from about 354,000 in 2005. The remodeling sector in NAHB’s forecast “is also showing persistent positive growth during 2006, partly reflecting hurricane-related expenditures,” Seiders said.

The pace of home price appreciation will be cut about in half over the next year, from an estimated average of 10.7% for 2005 as a whole, to 6.5% in 2006 and about 4.4% in 2007, the economist said.

Glassman’s outlook for 2006 is “growth without the steroids.” Overall, he said he believes the U.S. is hitting the midpoint of an economic expansion, and “the next several years should present a good backdrop for growth with low inflation.”

Stock Watch
Industry Stocks Slide As Year Draws to a Close

Advancing stocks edged out declining issues 27-23, with 10 stocks reaching a new 52-week high and 23 descending to a new annual low. Top gainers for the period included Electrolux, USG Corp. and Beazer Homes. Armstrong Holdings, Avatar and Emerson Electric were among the biggest losers.

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