The U.S. housing market fueled by declining mortgage interest rates, strong home-buying activity and continued high levels of refinancing continued at mid-year to remain the nation's leading economic sector, with gains reflected in key product categories that define the kitchen and bath industry. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:
Indicating that the lowest mortgage rates in nearly half a century are providing solid motivation for home buyers, builder confidence in the market for new single-family homes rose strongly in June, the National Association of Home Builders reported last month. The surge in builder confidence came on the heels of May housing starts that ascended to a seasonally adjusted annual rate of 1.73 million units up 6.1% from the previous month the Commerce Dept. reported.
Home builders boosted the pace of single-family housing construction by 1.5% in May, to a seasonally adjusted annual rate of 1.38 million units; at the same time, multi-family starts rose 29.2%, to a 354,000-unit rate, the NAHB said. In addition, the issuance of building permits was up 3.7% to a seasonally adjusted annual rate of 1.79 million units the strongest pace since last December. And, at the same time, sales of new single-family homes climbed for the third consecutive month in May, rising 12.5% over April's pace and hitting a record-high seasonally-adjusted annual rate of 1.16 million units.
"There is no question that today's interest-rate picture is the best it has been in many decades, and house values have continued to move up at a solid pace," noted NAHB chief economist David Seiders. "These factors have stimulated both home buying and mortgage refinancing by America's homeowners." He added that, based on existing and anticipated factors, the outlook for housing remains highly favorable.
Existing single-family home sales, hitting the third-highest monthly pace on record during May, are "defying earlier expectations" with their continued strong performance, the chief economist for the National Association of Realtors said last month. "The pace of home sales so far this year has been higher than projected, and we still expect sales activity to ease a little but to end the year with a new annual record," said NAR chief economist David Lereah, attributing the record sales pace to historically low mortgage interest rates.
The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was a record-low 5.48% in May a month during which existing-home sales rose 1.2% to a seasonally adjusted annual rate of 5.92 million units, the Washington, DC-based NAR reported. May's sales activity was 4.4 percent above the 5.67-million unit pace in May 2002, the NAR added.
Domestic shipments of major home appliances increased once again in June, and remained well ahead of the record-setting pace of 2002, the Association of Home Appliance Manufacturers reported last month. According to the Washington, DC-based AHAM, June appliance shipments gained 15.9% over those of June 2002, and year-to-date shipments for the first six months of 2003 were 8.2% ahead of those for the same January-June time span last year. However, appliance shipment gains in June as in recent months were fueled primarily by advances in home comfort products. By comparison, January-June shipments of key kitchen items such as cooking, cleanup and food preservation products were running about even, or slightly below, year-to-date shipments in 2002, according to AHAM. The association has forecasted shipments of some 68.6 million appliances this year, eclipsing last year's record of 67.9 million units.
K&BDN Monthly Index Hits New High
The "Kitchen & Bath Industry Performance Index" surged this month, as the housing industry continued to post impressive results on nearly all fronts.
The Index an exclusive monthly gauge of business developed by Kitchen & Bath Design News rose to 122.5 this month, well over the pace set in any previous month. The Index started the year at a benchmark level of 100, and had declined to a low of 75.1 in April.
Fluctuations in the Index, which is based on dealer surveys and the latest available economic data, are aimed at providing an overall snapshot of the relative vitality of the kitchen and bath market (see Editor's Note, below).
Among the weighted components comprising this month's Index were the following:
- Surveyed kitchen and bath retailers reported an average of 73 prospects for May, a 15.7% decrease from adjusted April levels. An average of 18 sales were reported for the month, down 12.2% from adjusted April levels.
- Survey respondents reported that the average price of a kitchen remodeling job booked during the month was $25,001, and the average price of a bathroom remodeling was $14,585. The average number of weeks between the time a job is booked and the work actually begins was nine weeks for kitchens and eight weeks for baths.
- The Conference Board's monthly Consumer Confidence Index, which had improved moderately in May, was flat in June, although consumers' expectations for the next six months showed improvement.
- Unemployment continued to edge upward, hitting 6.4% in June, up from 6.1% in May.
- Shipments of kitchen appliances jumped 16.4% from April to May, to a total of 3.56 million units, according to the Association of Home Appliance Manufacturers. That figure was 2.8% over shipment levels for May, 2002.
- Housing starts rose 8.4% during May, to a seasonally-adjusted annualized rate of 1.73 million units, up 6.1% from April but down 1.1% from the pace set in May of 2002. In addition, the number of building permits issued in May jumped 2.2%, to 165,300 units. That translates to a seasonally-adjusted annualized rate of 1.778 million permits issued, up 3.9% over the levels for May, 2002.
- Some 108,000 new homes were sold during May, up 14.9% from April sales levels, according to the Census Bureau. That translates to a seasonally-adjusted annualized rate of 1.16 million new homes sold an all-time high.
- Existing-home sales jumped 9.8% from April to 560,000 units sold in May. That was 4.3% over the sales levels of the same month last year, and translates to a 5.92-million-unit seasonally-adjusted annualized rate, the third-highest monthly pace on record, according to the National Association of Realtors.
- The average contract interest rate for 30-year fixed-rate mortgages increased to 5.37% at press time, according to the Mortgage Bankers Association of America. Refinancing applications, often a barometer of remodeling activity, also declined slightly but still remained at historically high levels.
- Stocks associated with the kitchen and bath industry recorded another month of advances in June, although they were still down 4.6% for the first half of the year.