Market Continues On Growth Curve

Market Continues On Growth Curve

Driven by a robust housing market that continues to run counter to the still-sluggish U.S. economy, the kitchen and bath industry is demonstrating continued growth as the second half of 2002 gets underway. Among the key statistics released by government agencies and industry-related trade associations in recent weeks were the following:

Indicating that the nation's housing market "continues to provide a crucial source of strength to the national economy," sales of new single-family homes surged 8.1% in May, to a record high seasonally-adjusted annual rate of 1.03 million units, the Commerce Dept. reported. "Low interest rates and the solid investment potential of homes are encouraging more buyers than ever to go forward with a new home purchase," said Gary Garczynski, president of the National Association of Home Builders (NAHB). Garczynski noted that in the first 12 months after purchasing a newly built home, owners spend an average of $8,900 to furnish, decorate and improve their investment. New-home sales rose in every region of the country in May, the latest figures reveal. Rebounding from a previous dip, the Northeast posted the biggest gain, 26.4%, while the South, West and Midwest posted more moderate gains of 10.6%, 4.3% and 2.7%, respectively, the government said. "We expect a healthy pace of sales through the second half of the year," Garczynski further noted.

Housing starts for 2002 should wind up posting a gain over the strong year experienced in 2001, according to the latest forecast from the National Association of Home Builders. The Washington, DC-based NAHB forecast last month that about 1.64 million units will be constructed by the nation's home builders this year, up 2.5% from last year. "While we may see some tapering off from this high rate of housing production in months to come, it's clear that the housing component of Gross Domestic Product is still providing good support to the budding economic recovery," said NAHB chief economist David Seiders. The NAHB attributed the impressive housing performance largely to favorable mortgage rates, coupled with "strong house-price performance that has bolstered the investment potential of homes at a time when investments in the stock market have been performing badly," Seiders noted. A report issued in June by the Joint Center for Housing Studies at Harvard University projected that the U.S. housing market will continue to grow, and home prices will continue to rise, for the next two decades.

Sales of kitchen cabinets and bathroom vanities, mirroring growth throughout the industry, rose again in May, 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 May cabinet sales gained 12% over sales in May of 2001. Year-to-date sales from January through May were up 11% over the same five-month period a year earlier, with stock cabinet sales up by 12.6% and custom cabinet sales up by 3.6%, the KCMA added.

Domestic shipments of major home appliances surged 14% in May over the same month in 2001, and are on pace to shatter the all-time record for annual sales, the Association of Home Appliance Manufacturers said last month. The Washington, DC-based AHAM projected that 2002 appliance shipments will total just shy of 66.6 million units, up significantly from the 64.6 million units shipped in 2001, and well over the record 65 million units shipped in 2000. AHAM also projected a gain in 2003, to 67.5 million units (see graph above). The May increases, posted across virtually all key appliance categories, brought year-to-date shipments through the first five months of 2002 to 28.29 million units, up 7.3% over the 26.35 million units that were shipped from January through May of 2001, AHAM said, adding, "The most significant increases during May were in food preservation products (up 12.2%), cooking equipment (up 9%) and kitchen clean-up (up 7.8%)."

Market Analysis

Second Home Market Projected to Grow

Washington, DC Sales of second homes, including both vacation homes and investment properties, remain well above historic norms, with housing analysts expecting that trend to remain a reality into the foreseeable future.

That's the word from the National Association of Realtors, which reported in June that 5.5% of all single-family homes sold in 2001 were second homes.

The construction and resale of these second homes, analysts point out, could have a major impact for home builders and remodelers working in areas that are widely viewed as attractive locations for such homes. These areas include Florida, California, Texas, Michigan, Maine, Vermont, New Hampshire, Alaska, Delaware, Wisconsin and Arizona, among other states.

"Second homes have enjoyed a healthy pace in recent years, due to demographic demand and increases in household income," the Washington, DC-based NAR observed.

In fact, according to the trade association, the demographic impact alone from large numbers of people in their 40s and 50s entering the second-home market could potentially add 100,000 to 150,000 housing starts each year through the end of the decade.

The typical second-home buyer is the same core buyer as the person who represents the core of today's kitchen and bath market: It's a middle-class Baby Boomer, aged 46, married in most cases, and with a median household income of $77,700.