Market Remains Resilient in Face of Modest Declines

The housing market remains an engine of economic growth and continues to provide strength in the kitchen/bath market, even in the face of the modest, and expected, declines predicted for this year. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

The market for existing-home sales "appears to be in the early stages of settling down" from what were "unprecedented levels" during most of 2004, the National Association of Realtors said last month. Reacting to a 0.4% dip in resales during February, Washington, DC-based NAR said the cooling it expects in sales this year "means we'll be transitioning from a white-hot housing market into a very strong market that still favors home sellers, but should become more balanced as the year progresses." Despite the February decline, existing-home sales satyed above year-ago levels, while home prices rose at double-digit rates, NAR noted.

February sales were at a seasonally adjusted annual rate of 6.79 million units, down from the 6.82-million-unit pace in January, but still 6.1% above the 6.40-million-unit pace in February 2004. The national median existing-home price for all housing types was $191,000 in February, up 11% from February 2004, when median price was $172,000.

The "appeal of homeownership" continued to drive the housing market in February, as single-family housing starts set a new all-time record and multi-family construction was buoyed by the condominium market, the National Association of Home Builders reported. Total housing starts increased by 0.5% in February, to a seasonally adjusted annual rate of 2.195 million units, setting a new 21-year-record for the second month in a row. The February pace was also 15.8% above that of a year ago. "Homeownership continues to plow ahead," said David Seiders, chief economist for Washington, DC-based NAHB. "There's no question that the housing market is still an engine of economic growth," he said, cautioning, however, that "we do expect housing to plateau as the year progresses." As of press time, though, the recent increase in mortgage rates apparently hadn't dampened either buyer demand or builder enthusiasm, NAHB noted. "Robust buyer demand continues to sustain the new-home market, with no sign of letting up in the near future," said NAHB president Dave Wilson. "Many builders are solidly optimistic about their prospects in coming months. Demand for new homes still exceeds supply in many markets, while financing conditions remain quite favorable, and jobs and incomes are on the rise."

Domestic shipments of major home appliances declined for the second consecutive month in February, although the drop was largely due to a key decline in shipments of home comfort products like room air conditioners, the Association of Home Appliance Manufacturers reported. Appliance shipments for February totaled 5.62 million units, down 6.4% from the 6.0 million units shipped in February of 2004, said Washington, DC-based AHAM. Shipments for the first two months of 2005 totaled 10.35 million units, down 8.2% from the first two months of '04, AHAM added. February declines were reported for food preservation products (-6.5%), cooking equipment (-3.8%) and home comfort products (-35.7%). Gains, however, were reported for kitchen clean-up products (+4.7%) and home laundry products (+4.5%). AHAM has forecast that 78.7 million appliances will be shipped this year, up from the record 77.9 million appliances shipped in 2004.

Sales of kitchen cabinets and bath vanities rose 12.8% in February over sales the same month a year earlier, the Kitchen Cabinet Manufacturers Association said last month. According to Reston, VA-based KCMA, manufacturers participating in the association's monthly "Trend of Business" survey reported sales of stock cabinets were up 12.3% for the month, while semi-custom cabinet sales increased 13.6% and custom cabinet sales gained 11.9%. Year-to-date cabinet sales for the first two months of 2005 were up 12.8% over the same period a year ago, KCMA added.