Uncertainties Fail To Dampen Market

Uncertainties Fail To Dampen Market

Against a backdrop of the war on terrorism and shaky consumer confidence, the housing market and related kitchen/bath sector continue to post impressive results, with 2002 witnessing new annual highs on a number of fronts. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

The projected economic and financial market environment "should support a healthy housing market" this year and in 2004, with total housing starts ranging between 1.62 and 1.63 million units each of the two years, the National Association of Home Builders projected last month (see related Forecast 2003 coverage, Pages 52-56). According to David Seiders, chief economist for the Washington, DC-based NAHB, the next two years will follow what was an "unsustainably high rate" for housing starts of close to 1.7 million units last year. In fact, housing starts surged to an annual rate of 1.84 million units in September of 2002, the highest rate since June of 1986, the NAHB reported. "Single-family starts should continue to account for nearly 80% of the total, and the nation's homeownership rate should resume an upward trend," following a modest, recession-provoked setback in the first half of 2002, Seiders observed.

As 2002 came to a close, the housing market was "still hot, with both new- and existing-home sales increasing," the National Association of Realtors reported in November. According to David Lereah, chief economist for the Washington, DC-based NAR, 2002 will wind up producing a record for existing-home sales, with resales projected to register 5.47 million units up from the previous record of 5.29 million existing homes sold in 2001. At the same time, new-home sales will also post a record in 2002, with 929,000 homes sold up from the previous record of 908,000 in 2001. "Perhaps most importantly, the nation's homeownership rate continues to hover near a record 68%," Lereah noted.

Sales of kitchen cabinets and bathroom vanities increased 14% in October of 2002, compared to October of the previous year, 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 stock cabinet sales were up 12% in October, while semi-custom cabinet sales rose 27% and custom cabinet sales posted a 1% decline, the KCMA said. Year-to-date sales from January through October of 2002 were up 11.7% over the same 10-month period in the previous year, the KCMA added.

Domestic shipments of major home appliances through October of 2002 were running 4.9% higher than the same 10-month period a year earlier, as appliance shipments continued to mirror forecasts for a new annual record, the Association of Home Appliance Manufacturers reported. According to the Washington, DC-based AHAM, some 56.08 million appliances were shipped from January through October, up from the 53.47 million that were shipped over the same time span in 2001. Appliance shipments were running ahead of the previous year in virtually all product categories including cooking, kitchen cleanup, food preservation and home laundry according to AHAM, which had forecast that 2002 shipments would total some 67.5 million units, up from the 64.6 million units shipped in 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.