Forecasts Remain Positive Through '04

Forecasts Remain Positive Through '04

Forecasts for housing starts, residential remodeling activity and shipments of key kitchen/ bath industry-related products remain highly favorable through mid-year, according to the latest economic barometers. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Residential remodelers are bullish in their economic outlook for 2004, according to the National Association of Home Builders, which last month released the latest results of its Remodeling Market Index (RMI). According to the Washington, DC-based NAHB, the quarterly index rose to a record level of 59 in the first quarter of 2004, "signaling positive impressions of current market conditions, as well as expectations for the near future" among remodeling professionals, including kitchen and bath specialists. "When the RMI moves above 50, it tells you that the industry is very healthy," said NAHB Remodelors Council Chairman Douglas Sutton, Sr. "Not only have we recorded the strongest first-quarter index rating in four years, but across the country we are also seeing record numbers of calls for bids and reports of backlogs that will keep us busy throughout the year." The RMI is based on a quarterly survey of 582 professional remodelers, whose answers to a series of questions were assigned numerical values to calculate both current and future market conditions. "The current market conditions index shows a very strong market, compared to the same period last year," said NAHB Chief Economist David Seiders (see graph at right).

Sales of existing single-family homes should moderate as the year goes on, but should nevertheless approach the record for resales established in 2003, the National Association of Realtors said last month. The Washington, DC-based NAR reported that existing-home sales increased for the third consecutive month in April, to a seasonally adjusted annual rate of 6.64 million units, and were at the second-highest pace on record. David Lereah, NAR's chief economist, said that strong sales numbers have been anticipated for both April and May. "Part of what we're seeing now is 'fence-jumping' by people wanting to buy a home before interest rates move higher," Lereah said, noting that, even with recent rises, mortgage interest rates appear to be leveling-out in the 6.3% range. "Although the pace of home sales should be slower in the second half, total sales in 2004 will be close to last year's record," said NAR President Walt McDonald.

Domestic shipments of major home appliances are expected to set records both this year and in 2005, according to the latest forecast released by the Association of Home Appliance Manufacturers. The Washington, DC-based trade association said last month that its latest revised forecast pointed to a total of about 75.3 million appliances being shipped in 2004, up from the record 73.7 million units that were shipped last year. The forecast for 2005 calls for an increase over this year, to 76.9 million units, AHAM said.

Sales of kitchen cabinets and bathroom vanities increased 19.1% in April 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 association's monthly "Trend of Business" survey reported that year-to-date sales for the first four months of 2004 were running 18.3% over sales in January through April of 2003.

K&BDN Index Remains Favorable at Mid-Year

The kitchen and bath industry, like the rest of the housing market, apparently continues to remain resilient and on a growth track, comparing favorably at mid-year to its solid performance in 2003.

The "Kitchen & Bath Industry Performance Index" an exclusive quarterly gauge of business activity developed by Kitchen & Bath Design News reached a healthy level of 114.69 last month, up markedly from its last reading, in April, and up over the level achieved the same month last year.

The Index which was set at a benchmark level of 100 when it was developed in January of 2003 has ranged from a low of 75.1 in April of 2003 to a high of 124.6 in September of '03.

Fluctuations in the Index, which is based on dealer surveys and the latest available economic data, are aimed at providing a snapshot of the relative vitality of the kitchen and bath market.

Among the weighted components comprising this month's Index were the following:

  • Although the average number of kitchen and bath prospects seen by retailers responding to K&BDN's quarterly survey slipped to 13, the average number of sales booked during the month increased to 10. The average number of weeks between the time a job was booked and the work actually begins was six weeks for both kitchens and baths.
  • The Conference Board's Consumer Confidence Index was somewhat improved from recent months, with the pickup in the job market offsetting the impact of high gas prices and continuing tensions overseas.
  • Both housing starts and building permits remained at relatively high levels, and up over the same time in 2003, indicating that momentum in the housing industry continued to be as strong as any time in the recent past.
  • Kitchen appliance shipments remained at healthy levels, and seemed on pace to break the previous annual record, set in 2003.
  • Existing-home sales, despite slowly rising interest rates, remained at a robust, six-million-unit annual pace with expectations high for a continued favorable performance by resales. At the same time, sales of new homes were being forecast to total 1.113 million units by year's end, up some 2% from the record pace of 2003.
  • Sales of kitchen cabinets and bathroom vanities continued their longstanding track record of month-over-month growth.
  • The unemployment rate remained unchanged, amid indications that more jobs are opening up while fewer are lost.
  • Stock prices for firms involved in the kitchen and bath industry edged up in May, while major home improvement retailers Home Depot and Lowe's Companies reported significant gains in first-quarter sales over the same period a year earlier.

The average contract interest rate for 30-year fixed-rate mortgage remained in the 6+% range at press time.