Records Forseen, While Market Cools

The housing market, expected to cool down from its blistering pace in recent months, should post new records in several key components this year, including home sales, remodeling expenditures and cabinet sales, the latest economic barometers reveal. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

RESIDENTIAL REMODELING

Residential remodeling activity continued to grow in the second quarter of 2005, fueled by the high rates of home sales and home price appreciation, the National Association of Home Builders reported last month. According to the NAHB’s quarterly Remodeling Market Index (RMI), the second-quarter results were slightly below the seasonally adjusted first quarter of 2005, but remained in the positive growth range. The RMI “still shows above-average activity for the past quarter and this will continue into the third quarter,” the NAHB said. The Index is derived from a quarterly national survey of more than 500 remodelers, and measures both current market conditions and future expectations.

NEW- & EXISTING-HOME SALES

Home sales are expected to trend down from record levels during the second half of 2005, but should easily set annual records for both new- and existing-home sales, the National Association of Realtors predicted last month. Existing-home sales are forecast to increase 2.9%, to 6.98 million units for 2005, while new-home sales are expected to rise 4.8%, to 1.26 million units this year, according to the Washington, DC-based NAR. Total housing starts – single-family and multifamily – should grow by 3.2%, to 2.02 million units, the highest level since 1978, while single-family starts are projected to set a record of 1.67 million, the NAR said. “The housing market is probably close to a peak right now in terms of sales activity, but there is tremendous momentum,” said David Lereah, NAR’s chief economist. “Sales are expected to coast at historically high levels into next year, but they will trend slightly downward.”

CABINET & VANITY SALES

Sales of kitchen cabinets and bathroom vanities rose 12.4% in July over sales 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 its monthly “Trend of Business” survey reported that sales of stock cabinets were up 11% for the month, while semi-custom cabinet sales increased 16.1% and custom cabinet sales gained 3.8%. Year-to-date cabinet sales for the first seven months of 2005 were up 14.5% over the same period a year ago, the KCMA added (see related graph above).

APPLIANCE SHIPMENTS

Domestic shipments of major home appliances rose in July, reversing a year-long trend of month-to-month declines compared to the previous record year, the Association of Home Appliance Manufacturers reported. According to the Washington, DC-based AHAM, some 5.932 million appliances were shipped in July, up 7% from the 5.542 million units shipped in July of 2004. Year-to-date shipments for the first seven months of 2005 were pacing just 0.5% below the record pace established last year, AHAM noted. According to the latest AHAM forecast, released in mid-August, approximately 78.58 million appliances are expected to be shipped this year, down from the record 79.21 million units shipped in ’04, but still the second-best year in the industry’s history. AHAM’s 2006 forecast projects that a record 80.29 million appliances will be shipped.

MARKET ANALYSIS

Most Areas See Historically High Home-Price Gains During Second Quarter of 2005

WASHINGTON, DC — Most metropolitan areas witnessed historically strong annual increases in median existing-home prices during the second quarter, according to the latest survey by the National Association of Realtors.

The association’s second-quarter metro area home price report, covering changes in 149 metropolitan statistical areas, revealed that 67 areas posted double-digit annual increases in median existing single-family home prices, while seven areas posted “generally modest” price declines; none of the areas seeing declines had previously recorded rapid gains, the NAR noted.

The national median existing single-family home price was $208,500 in the second quarter, up a whopping 13.6% from the second quarter of 2004, the NAR reported.

David Lereah, the NAR’s chief economist, termed the price gains unprecedented. “When you look at appreciation of home prices relative to the overall rate of inflation, these are the strongest increases on record,” he said.

The areas experiencing price declines were lower-priced markets, with one or both of the conditions necessary for price softness – local economic weakness, primarily in jobs, or a large supply of homes for sale in the local area, the NAR noted, adding that these are typically temporary conditions.

Regionally, the strongest increase was in the West, where the median existing single-family home price rose 19.5% over the last year during the second quarter. In the Northeast, the median resale price during the second quarter was up 13.1%, while price gains were also reported in the Midwest (+12.1%) and the South (+5.7%).

STOCKWATCH

Stocks, Hit by Storm, Plummet in August

Stocks associated with the kitchen and bath industry took a beating, along with the rest of Wall Street, in August, as Hurricane Katrina and surging oil prices took a destructive toll on investors.

The index of 54 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 80.48 points, or 3.10%, to close the trading period from August 5 through Sept. 2 at 2515.28. In similar fashion, the Dow Jones Industrial Average dropped 110.63 points, or 1.05%, ending the month-long trading period at 10447.37, while the Nasdaq Composite Index lost 36.84 points, or 1.69%, to close at 2141.07 (see Market Diary, below).

Declining stocks outpaced advancing issues 34-17, with only three of the stocks reaching a new 52-week high and two dipping to a new annual low.

Top gainers for the period included Owens Corning, USG Corp. and Maytag Corp. Jacuzzi Brands and Fortune Brands were among the biggest losers.

Editor’s Note: Several of the companies listed in KBDN’s monthly Stock Index are parent companies of – or have key financial ties to – building and remodeling industry product suppliers. Included are the following: Armstrong World Industries (Triangle Pacific, Bruce Hardwood, Hartco Flooring); Black & Decker (Price Pfister, Kwikset, DeWalt); DR Horton (Schuler Homes); Electrolux AB (Frigidaire Co.); Fortune Brands (Moen, MasterBrand Cabinets – Aristokraft, Decorá, Diamond, Kemper, Omega Cabinetry and Schrock); Griffon Corp. (CLOPAY); Illinois Tool (Wilsonart International, Florida Tile); IAC/InterActiveCorp (ServiceMagic, Inc.); International Paper (Nevamar); Knape & Vogt (Feeny Mfg.); Masco Corp. (Merillat Industries, KraftMaid, Delta Faucet, Peerless Faucets, Aqua Glass/Huppe, Melard Mfg., Zenith Products and Baldwin Hardware); Maytag Co. (Jenn-Air and Magic Chef); Mohawk Industries (Dal-Tile); Newell Rubbermaid (Amerock); OfficeMax; Pentair (Porter-Cable); Technical Olympic USA (Engle Holdings Corp. and other home-building companies.); Tomkins (LASCO Bathware and Pegler Ltd.); U.S. Industries (Jacuzzi Brands, Inc.); Weyco Group (Willamette Industries); and Whirlpool Corp. (KitchenAid and Roper).

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