New Year Seen Off to Solid Start

New Year Seen Off to Solid Start



HOUSING STARTS


NEW- & EXISTING-HOME SALES


CABINET & VANITY SALES

APPLIANCE SHIPMENTS
Domestic shipments of major home appliances are expected to set another record in 2003, topping the record set year last year, the Association of Home Appliance Manufacturers forecast last month. According to the latest forecast issued by the Washington, DC-based AHAM, some 68.75 million appliances are expected to be shipped in 2003, up from the 67.69 million units that were shipped last year. Prior to 2002 the highest total for appliance shipments was posted in 2000, when just under 65 million appliances were shipped, AHAM said. Projections for 2003 call for gains in virtually all product categories, including cooking (22.58 million units projected in '03, up from 22.27 million units in '02); kitchen clean-up (11.96 million units projected in '03, up from 11.29 million units in '02); and food-preservation appliances (12.19 million units projected in '03, up from 11.52 million units in '02), AHAM noted.

New Index Off From January Benchmark

The "Kitchen & Bath Industry Monthly Performance Index," unveiled for the first time by K&BDN in this month's issue, reveals that the kitchen and bath market based on dealer surveys and the latest available economic data declined this month from the levels it had posted 30 days ago.

The Index was 100 in January 2003; by comparison, it registered 95.2 this month.

Fluctuations in the Index as the year progresses will provide K&BDN readers with a glimpse into the on-going vitality of the market (see Editor's Note, below).

Among the weighted components comprising the February 2003 Index were the following:

  • Surveyed kitchen and bath retailers reported an average of 19 sales prospects, and five sales for the month of November 2002. Both numbers show a marked difference from October '02 levels in part, because of expected seasonal differences.
     
  • The Consumer Confidence Index indicated that consumer expectations have improved in November of 2002 compared to October's readings. Those consumers anticipating an improvement in business conditions in the next six months have increased, while the number of those expecting conditions to deteriorate have declined.
     
  • The employment outlook was also more favorable, according to the latest numbers. The number of consumers who are expecting fewer jobs over the next six months has declined, while those anticipating more jobs held steady. Income expectations were also significantly more optimistic.
     
  • Aggregate stock prices for firms involved in the kitchen and bath lost ground during December of 2002, as investors seemed rattled by geopolitical tensions and disappointing forecasts for corporate earnings (see StockWatch, Page 10).
     
  • Sales of kitchen cabinets and bathroom vanities increased November of 2002 compared to the same month a year earlier. At the same time, appliance shipments remained robust at year-end 2002, and were poised to continue their record-breaking pace throughout this year.
     
  • Housing starts in November of 2002, while down from a month earlier, were well ahead of the pace set during the same month the previous year. Building permits, however, were significantly down, with 2003 seen as a year in which overall housing starts are expected to decrease.
     
  • According to the Index, rates for new- and existing-home sales were at, or near, record levels.
     
  • The national average commitment rate for a
    30-year, conventional, fixed-rate mortgage was under 7% last month.
     
  • The two largest home center chains posted healthy sales increases during the third quarter of 2002. Home Depot sales jumped 8.9% in that period to $14.48 billion, while Lowe's sales were up 17.6% to $6.41 billion. However, Wickes sales dipped 19.6% in the third quarter to $237.3 million.
     

Editor's Note: Kitchen & Bath Design News this month introduces an exclusive new feature the "Kitchen & Bath Industry Monthly Performance Index" aimed at providing an on-going comparative measurement of kitchen/bath market vitality.

K&BDN has developed the new Index based on a number of key economic and business performance components. Weighted scores for each of those components have then been used to calculate the Index, which has been set for benchmark purposes at 100 for January of 2003. Future fluctuations in the Index will be compared to the benchmark number posted in January.

The largest component of the Index consists of confidential monthly reports from surveyed kitchen and bath retailers on their levels of sales floor traffic and signed contracts, as well as their average kitchen and bath prices.

Other components of the Index include the latest available statistics on key economic indicators. Among them: housing starts, building permits, new- and existing-home sales, mortgage rates, cabinet sales, appliance shipments, consumer confidence ratings and unemployment levels. Also included in the Index are the performance of major industry-related stocks, and home center sales.

Market Analysis

Remodelers Slightly Less Busy, and Less Optimistic, New Survey Finds

Washington, DC Residential remodelers, who have been generally busy despite the soft U.S. economy, were less bullish about the overall business climate at the end of 2002 than at virtually any point in the past two years.

This is according to the latest Remodeling Market Index (RMI), a series of quarterly reports issued by the National Association of Home Builders. Remodelers' assessments of current market conditions, as well as future expectations, were down from levels posted throughout 2001 and '02. The RMI, based on the responses of some 600 remodelers, measures both current market conditions and future expectations based on such factors as the amount of work committed for the next three months, appointments for proposals and the backlog of remodeling jobs.

The latest RMI on current market conditions, released in the fourth quarter of 2002, was 49.3, off from 52.7 the previous two quarters, and from 55+ levels in the first two quarters of 2001, according to the Washington, DC-based NAHB.

It was the lowest level for the RMI since the post-Sept. 11 attacks, when the RMI dropped to 45, the trade association added.

The latest RMI for future expectations revealed a level of 48.0, off from 52.2 in the second quarter of 2002 and from 57+ levels in the first two quarters of 2001.

Market Analysis

U.S. Housing Market Seen Varying Widely by Region in 2003

Washington, DC The U.S. housing market, coming off unsustainably high levels in 2002, will witness a decline in housing starts this year although the pattern of starts will vary by state, depending on regional conditions.

That's the view of Stanley Duobinis, director of forecasting for the Washington, DC-based National Association of Home Builders. Addressing representatives of the building products industry at the NAHB's recent Semi-Annual Construction Conference here, Duobinis forecast that the housing industry "will see both growing housing markets and declining ones in 2003, just as we did in 2002."

The most active markets continue to be in the Southeast and West, with some notable weakness among some "high-tech" states, Duobinis said, noting that local housing demand "is a function of local household creation, as well as special factors such as second home demand."

"And, household creation depends on job creation," he said. "Ultimately, high rates of job creation translate into good housing markets."

Although the recession "has been over for a while and the number of states seeing year-over-year job growth is growing, that growth is still 'sluggish,' " Duobinis pointed out, noting that, from September of 2001 to September of 2002, employment grew in just 14 states.

The most rapidly-expanding housing states from September 2001 to September 2002 included Nevada, Arizona, Kentucky, Montana, Oklahoma, Rhode Island, Wisconsin, New Mexico, Florida and Texas. Among the weakest states over the same time span were Utah, Colorado, Georgia, Missouri and Washington.

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