2002 Finishing Strong Despite Economic Woes

2002 Finishing Strong Despite Economic Woes

Despite the deterioration in the stock market, the sluggish economic recovery, and declining consumer confidence resulting from global and domestic uncertainties, the housing industry and related kitchen/bath sector are on the verge of posting an enormously successful year as 2002 winds to a close. Among the key statistics released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Continuing problems in the stock market coupled with falling mortgage rates have continued "to buoy the single-family housing market, stimulating home sales and maintaining upward pressure on home prices," the National Association of Home Builders observed last month. According to David Seiders, chief economist for the Washington, DC-based NAHB, the combination of strong home prices and low mortgage rates has bolstered home equity levels and prompted high levels of home refinancing "a process that has unleashed huge amounts of funds to support consumer spending, as well as the pay-down of higher-cost forms of debt." Housing starts, fueled by single-family construction, surged to an annual rate of 1.84 million units in September, the highest rate since June of 1986, the NAHB reported. For single-family starts, the rate was the highest since November, 1978, the association added.

The availability of credit resulting from low mortgage rates "will continue to support" home price appreciation and the sales of existing homes, with 2002 proving to be a record year for resales, the National Association of Realtors said last month. The Washington, DC-based NAR said that its analysts were predicting a record total of 5.44 million existing-home sales for the year, up from the record of 5.3 million sales set in 2001. Likewise, home prices experienced above-normal appreciation, with a national median existing-home price of $163,600 in August a 6.4% increase from August of 2001 the NAR reported.

Kitchen cabinet and bathroom vanity sales gained 12.9% in September, the Kitchen Cabinet Manufacturers Association said last month. The Reston, VA-based KCMA noted that manufacturers taking part in its monthly "Trend of Business" survey reported that stock cabinet sales were up 13% in September, while semi-custom sales rose 20.7% and custom cabinet sales posted a 5.3% decline. Year-to-date sales from January through September were up 11.4% over the same nine-month period a year earlier, the KCMA added.

Domestic shipments of major home appliances through September were running 5.1% higher than the same nine-month period in 2001, as appliance shipments continued to head toward a new annual record, the Association of Home Appliance Manufacturers reported. Appliance shipments through September were running ahead of last year in virtually all product categories including cooking, kitchen clean-up, food preservation and home laundry according to the AHAM. The Washington, DC-based trade association has forecast that 2002 shipments should total some 67.5 million units, up from last year's total of 64.6 million units. Appliance industry shipments have grown annually nearly every year since 1991 a year in which some 40 million appliances were shipped domestically.

Market Analysis

Investment in Housing Seen Increasing Sharply This Decade

Chicago Single-family housing investment and mortgage debt will more than double in this decade, as a series of factors continues to favorably impact the U.S. housing market, according to a leading economist.

David Berson, v.p. and chief economist for Fannie Mae, told attendees of the National Housing Conference held here in October that several key economic and demographic factors will lead to continued growth in housing investment through 2010. That growth, fueled in large part by low interest rates, should create high levels of housing starts, home sales and mortgage originations, Berson said (see graphs above).

The economist said that housing starts should average between 1.64 million and 1.68 million units annually through the end of this decade, compared to an average of 1.41 million in the 1990s and 1.48 million in the 1980s. At the same time, new-home sales should average between 910,000 and 930,000 units per year (compared to 730,000 units per year in the 1990s and 610,000 units per year in the 1980s), while existing-home sales are projected to average between 5.5 million and 5.64 million units per year through the end of the decade (compared to 4.21 million units in the '90s and 2.98 million units in the '80s).

Berson attributed the projected growth to four key factors: household formations, which will continue to grow at 1990s' rates; homeownership, which will continue to be boosted by aging Baby Boomers, minorities and immigrants; home price appreciation, fueled by strong demand and weak supply, and homeowner debt-to-value ratios.