Housing Reported Off to Solid '03 Start
The remarkable 2002 performance posted by the
nation's housing market is apparently continuing in 2003 according
to the first industry-related barometers generated for this year.
Among the key statistics released by government agencies, research
firms and industry-related trade associations in recent weeks were
HOUSING STARTS/HOME SALES
The nation's home builders remained "solidly optimistic" about conditions in the single-family housing marketplace in February, the National Association of Home Builders reported last month. The Washington DC-based NAHB said that its monthly Housing Market Index (HMI) was down two points, to a still-healthy 62 reading in February. The HMI has remained within the same relatively high three-point range since September of 2002, the trade association pointed out (see graph at right). Builders began work on new homes and apartments at a seasonally adjusted annual rate of 1.85 million units in January, according to Commerce Dept. figures. In addition, Commerce Dept. figures released last month revealed that more newly built homes were sold in 2002 than in any other year in history, with December of 2002 posting the strongest sales pace for any month on record. Total new-home sales for 2002 reached 976,000, up 7.5% from the previous annual record of 908,000 units, set in 2001. For the month of December 2002 alone, new-home sales hit a seasonally adjusted annual rate of 1.08 million units, up 3.5% from the previous month.
Total existing-home sales, which include single-family, apartment condominium and co-operative sales, rose in 45 states and the District of Columbia in the fourth quarter of 2002 compared with the same period in 2001, the National Association of Realtors reported last month. In addition, fourth-quarter sales were up 5.8% from a pace of 6.19 million units recorded in the third quarter of 2002, and were the second-highest level on record, according to the Washington, DC-based NAR. Association president Cathy Whatley observed that both demographics and economics are at play in the strong sales performance (see related story, boxed below). Regionally, the West reported the strongest annual increase for the fourth quarter, up 14.8% from the fourth quarter of 2001. In the Midwest, total existing-home sales were up 9.2% over those in the fourth quarter of 2001. The Northeast was up 6.8%, and the South gained 5.1%, the NAR reported.
CABINET & VANITY SALES
Sales of kitchen cabinets and bathroom vanities increased 8.2% in January compared to the same month a year earlier, the Kitchen Cabinet Manufacturers Association said last month. The Reston, VA-based KCMA noted that manufacturers participating in the association's monthly "Trend of Business" survey reported that January declines in sales of stock cabinets (-1.3%) and custom cabinets (-5.1%) were more than offset by sales of semi-custom cabinets, which rose 34.4%.
Domestic shipments of major home appliances started 2003 down 3.3% from the pace set in January of 2002, although a new annual shipment record is still projected to be set this year, the Association of Home Appliance Manufacturers reported last month. According to the Washington, DC-based AHAM, appliance shipments totaled 3.66 million units in January, off from the 3.78 million units shipped the same month a year earlier. The declines were most pronounced in the categories of food preservation (down 12.4%), home laundry (down 7.5%), and kitchen clean-up (down 6.7%). Despite the January decline, AHAM is projecting a total of some 69.3 million appliances to be shipped in 2003, compared to shipments of about 67.9 million units last year.
K&BDN Index Slumps, as Activity
Perhaps unable to sustain the breakneck level of activity posted in recent months, the kitchen and bath industry is seemingly pausing to catch its breath, according to an exclusive monthly Index developed by Kitchen & Bath Design News.
Fluctuations in the Index, which is based on dealer surveys and the latest available economic data, are aimed at providing a regular glimpse at 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 an average of 11 sales prospects and seven sales for the month of January. Although sales were up from December's levels, prospects dipped and are now less than half of what they were in the initial survey last October.
Sales of kitchen cabinets and bathroom vanities rose 8.2% in January, 2003 over the same month a year earlier, with stock cabinet sales down 1.3%, custom sales off 5.1% and semi-custom sales up 34.4%. Kitchen appliance shipments fell 4.9% in January from the same month a year before, and plummeted 47.7% from December levels (see Barometers, Page 8).
Aggregate stock prices for firms involved in the kitchen and bath industry slipped 7.9% in February, 2003, as investors continued to be uncertain and skittish. The Dow Jones Industrial Average closed the month down 1.3%, although the NASDAQ was up 2.4%.
Housing starts in January were 3.6% below those of December 2002, although the seasonally-adjusted rate of starts was 1.85 million, 8.0% above the pace for January, 2002. However, building permits, an indicator of future housing activity, dropped 8.1%.
Existing-home sales declined 23.6% from December to January. At the same time, new-home sales dipped 2.1%.
The Consumer Confidence Index dipped slightly in January from December levels. Consumers' expectations for the next six months were also less optimistic than at year-end. Those anticipating business conditions to sour over the next six months rose to 14.0% while those anticipating an improvement in the economy declined to 17.7%. Those rating current business conditions as "good" increased to 15.0%. However, those holding the opposite view edged up to 26.5%.
Unemployment dipped to 5.7% in January. However, 20.9% of the consumers in the Consumer Confidence survey expected fewer jobs in the coming six months, an increase over the previous month, while only 14.3% anticipated more, a slight decline from December.
The national average commitment for a 30-year, conventional, fixed rate mortgage at press time was a record low 5.67%, leading to positive expectations for both home buying and refinancing.
Positive Interest Rate Outlook Seen Boosting Home Sales
Washington, DC Mortgage interest rates should remain favorable and help sustain strong levels of home sales this year, according to David Lereah, chief economist for the National Association of Realtors.
Lereah said last month that weak economic growth at the end of 2002 means it will take a little longer for momentum to build this year. However, Lereah added, "the silver lining" will be a continuation of affordable mortgage interest rates, particularly in the first half of the year, "which will help to sustain the strong momentum we currently have in the housing market."
Lereah said he expects the 30-year fixed mortgage interest rate to average 6.2% during the first half of 2003, before rising to 6.6% in the fourth quarter.
The Washington, DC-based NAR is projecting 5.4 million existing-home sales in 2003, second only to the 5.56 million sales posted in 2002. At the same time, the NAR said it expects 959,000 new-home sales, down modestly from a record 976,000 sales last year. Housing starts are forecast at 1.69 million units this year, also slightly below the 1.71 million units recorded in 2002.
Lereah also forecast that recent sharp increases in existing-home prices are expected to slow this year, but with a persistence of lean inventories of homes available for sale, it should continue to rise at a rate above historic norms.
"We expect the median existing home price to increase 4.8% in 2003," Lereah commented.