Market Fundamentals Seen Remaining Solid

Market Fundamentals Seen Remaining Solid

The New Year opened with optimism being expressed over the prospects for a continuation of a stellar performance by housing and related industries, based on a strong close to 2003 and an array of solid market fundamentals that remain in place for 2004. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Coming off one of the housing market's best years in history last year, the nation's home builders said they foresee "rock-solid market fundamentals" continuing to fuel demand for new homes in 2004. "Based on our expectations for mortgage rates, house-price performance, household formations and overall economic conditions, we're very optimistic that [housing] demand will settle at a slightly lower, but still-robust, level in 2004," said Kent Conine, president of the National Association of Home Builders. NAHB chief economist David Seiders pointed to market fundamentals including a modestly higher interest rate structure, stronger job and income growth, and maintenance of strong demographic foundations as reasons that single-family market activity should remain "at an elevated level" in 2004.

Bolstered by three consecutive record years, home sales "will continue to provide a strong foundation for the U.S. economy," while other economic sectors improve in 2004, the National Association of Realtors said. According to David Lereah, chief economist for the Washington, DC-based NAR, the fundamentals responsible for last year's housing record will be in play throughout 2004, as well. "Home sales will be off mildly for the second best showing ever in 2004," Lereah said. "With the economy improving, consumer confidence rising and jobs being created, a growing number of households will sustain strong housing demand. Only a modest rise in mortgage interest rates will slightly dampen the pace of home sales in 2004." The latest NAR forecasts call for 5.81 million existing-home sales and 1.02 million new-home sales in 2004 the second-best year on record for each.

Professional remodelers continued to enjoy strong demand for their services in last year's third quarter, and most expect healthy business activity throughout the next several months, according to the results of the National Association of Home Builders' latest Remodeling Market Index (RMI). "Low interest rates, rising home values and strong home sales are definitely contributing to the remodeling fervor among home owners," said NAHB Remodelors' Council chairman Mike Weiss. "In addition, the rebounding economy and rising consumer confidence are fueling substantial optimism among remodelers," Weiss said. The RMI, based on a quarterly survey of 434 professional remodelers, measures current market conditions, as well as future expectations based on calls for bids, amount of work committed for the next three months and job backlogs.

Domestic shipments of major home appliances advanced slightly in November of 2003, while continuing to set a record pace for the year, the Association of Home Appliance Manufacturers reported last month. November appliance shipments totaled 5.37 million units, rising 0.9% over shipments in November of 2002, according to the Washington, DC-based AHAM. Year-to-date shipments through November totaled 66.8 million units, up 8.8% over shipments in the same 11-month period a year earlier, AHAM added.

Market Analysis

U.S. Countertop Demand Forecast to Increase Steadily Through 2007

Cleveland, OH U.S. demand for residential kitchen and bath countertops is forecast to increase more than 2% annually as a "reflection of kitchen and bath remodeling expenditures that are expected to improve" through 2007, a leading industrial market research firm said last month.

According to the Cleveland, OH-based firm The Freedonia Group, kitchen and bath countertop demand will be fueled in part by a continued trend toward larger kitchens and more bathrooms in both new and remodeled homes. However, projected declines in new single-family housing starts will limit more robust gains through '07.

These and other countertop trends are contained in a new study released by The Freedonia Group. The study forecasts a total countertop market of 467 million sq. ft. by 2007, up from 420 million sq. ft. in 2002.

Advances in countertop demand will be stimulated by growth in the remodeling segment, which accounted for 71% of sales volume in 2002, according to The Freedonia Group.

"This is partly because kitchen and bathroom improvements are among the more popular home remodeling projects, and countertops are a key aspect of many of these remodeling projects," The Freedonia Group observed.

Laminate countertops will continue to account for the largest share of countertop shipments, with nearly 60% or 277 million sq. ft. of the total market by 2007, the research firm predicted. However, significantly stronger year-to-year gains will be experienced by natural stone, with the demand for stone "aided by consumer interest in the luxury and style that most stones offer," The Freedonia Group said.