Market Off Record Highs, But Still Solid

Market Off Record Highs, But Still Solid

The housing market may be cooling down a bit from its torrid, and unsustainable, 2003 pace, but the market for the construction of new homes and the sales of both new and existing homes is remaining robust. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Unusually bad winter weather across much of the country was at least partially responsible for a dampening of housing activity in February, although the outlook for housing "remains quite good heading into the spring home buying season," the National Association of Home Builders said last month. The NAHB's Housing Market Index (HMI) the association's monthly gauge of single-family builder confidence stood at its lowest level in February since July of 2003. "The new-homes market is still doing well, thanks to excellent financing conditions, great buyer demographics and improving economic indicators. The Washington, DC-based NAHB has anticipated a slowdown from the record pace of new-home sales in the final months of 2003, and the latest HMI "indicates builder expectations are consistent with that," the association said.

Sales of existing single-family homes were down in January from near-record highs, but remain "exceptionally strong," according to the National Association of Realtors. The Washington, DC-based NAR made its comments after the latest figures revealed that existing-home sales declined 5.2% in January, to a seasonally adjusted annual rate. That rate was down from the level of 6.37 million units a month earlier the third highest pace on record. January's sales activity, however, was 2% above the 5.92 million-unit pace of January 2003. "We have to keep in mind that the level of home-sales activity over the last six months has been the strongest on record," said NAR chief economist David Lereah. "The January pace was the sixth-highest ever and is above the total forecast for this year. We can expect month-to-month ups and downs, but the long-term trend is for home sales to stay close to record territory this year." NAR president Walt McDonald added that continued low interest rates, strong household formation and an improving economy are expected to fuel 2004 housing demand.

U.S. residential remodeling expenditures on owner-occupied properties "will continue to shine" in 2004 and 2005, as expenditures in that sector increase by 7.6% and 5.7%, respectively, according to a newly released forecast by the National Association of Home Builders. The total remodeling market, despite a sluggish performance in the rental sector, rose to an estimated $181.9 billion in 2003, up 4.9% over 2002, according to the latest NAHB statistics. The association said it is bullish over the prospects for continued market growth through 2012. "Over the next decade, the remodeling market should enjoy growth that will be better than that seen during the past 10 years," the Washington, DC-based trade association observed. Kitchen remodeling, bathroom remodeling and room additions continue to head the list of the most popular remodeling jobs being undertaken, the NAHB added.

Domestic shipments of major home appliances increased slightly in January compared to January of last year, the Association of Home Appliance Manufacturers reported. The Washington, DC-based association said that January appliance shipments totaled 4.96 million units, up 2.8% from the number shipped in January of 2003. Cooking appliance shipments rose 12.9%, while shipments of kitchen cleanup products gained 1.9%, and shipments of food preservation products increased 1.1%, according to AHAM.

Index Favorable, With '04 Fully Underway

The kitchen and bath industry seemingly remains on solid ground, with year-to-date 2004 indicators comparing favorably to the indicators of a year ago.

The "Kitchen & Bath Industry Performance Index" an exclusive quarterly gauge of business activity developed by K&BDN reached a respectable 90.58 this month, up some 20% from the same time a year ago.

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:

  • Surveyed kitchen and bath retailers reported that sales were up some 39%, to an average of 13, over reported sales a month earlier. Prospects were reported up by 32%, to an average of 34 for the month.
  • The average reported price of a kitchen sale for the month was $34,100, up an average of 7.9% from the previous month. The average reported price of a remodeled bath was $11,800, virtually indentical with the previous month's average. The average number of weeks between the time a job is booked and the work actually begins was reported at nine weeks for kitchens and eight weeks for baths.
  • The Conference Board's Consumer Confidence Index weakened significantly from a month earlier, as a result of continued concerns among Americans about a poor employment market.
  • Housing starts for January dipped 15.7% from December 2003 levels, according to Census Dept. reports.

However, that projected to a seasonally-adjusted annualized rate of 1.903 million housing units, up 4.1% over the pace for January, 2003. Single-family starts reached a seasonally-adjusted annualized rate of 1.537 million units in January, up 1.9% over the same month last year, while multi-family units were started at a 339,000-unit pace, up 21.9% over the rate for January, 2003 (see related Barometers, Page 8).

  • Sales of existing single-family homes were down in January from near-record highs but remain strong, according to the National Association of Realtors.
  • About 84,000 new homes were sold in January, according to the Census Bureau. That was up 10.5% from December sales levels, and up 20% over January, 2003.
  • January kitchen appliance shipments were up 7.1% over the same month in 2003, according to the Association of Home Appliance Manufacturers, with shipment totals reaching some 3.35 million units.
  • The average contract interest rate for 30-year fixed-rate mortgages remained at 5.41% as of press time, according to the Mortgage Bankers Association. The average contract interest rate for 15-year fixed-rate mortgages fell to 4.69%. At the same time, the refinance share of mortgage activity rose to 56.4% of total applications
  • Sales for the nation's two largest home center chains increased over the same period last year. Quarterly sales for Home Depot were up 14.5%, to $15.13 billion, in the period ended February 1, while sales at Lowe's jumped 20.1% in the fiscal quarter ending January 30, to $7.25 billion, with sales for the chain's fiscal year up 18.1% to nearly $30.84 billion.