Growth Seen, But Pace Slows

Growth Seen, But Pace Slows

The kitchen/bath and housing industries continued to post positive results as the second quarter of 2002 unfolded, although some moderation was being witnessed for several key indicators that were previously reaching levels considered to be unsustainable. Among the key statistics released by government agencies and industry-related trade associations in recent weeks were the following:

Housing Production
Despite some anticipated "downward adjustment" in housing production, the latest nationwide surveys of single-family builders reveal "no shortfall in buyer demand or builder confidence," with housing starts still on track to reach slightly higher levels than the 1.6 million units built last year, said Gary Garczynski, president of the Washington, DC-based National Association of Home Builders (NAHB). Garczynski attributed the housing sector's strength thus far this year primarily to low interest rates, positive house price movements and unseasonably good weather conditions. "With interest rates on long-term mortgages still below 7%, and with the economy on a recovery path, the market for new homes is in very good shape," added NAHB chief economist David Seiders, who also forecast "strong and stable" new-home sales through the balance of 2002. Seiders said the NAHB is currently projecting new-home sales of 903,000 units for this year, down only slightly from last year's record 908,000 units.

Existing-Home Sales
The recent decline in existing-home sales was anticipated, coming as it did off several record months of resales, but the current pace of home sales activity is still well above historic norms, according to the National Association of Realtors, also based in Washington, DC. NAR reported last month that the 6-million-plus level of resales posted in January slid to a seasonally adjusted annual rate of 5.4 million units in March, and should continue to slip to a more "sustainable" pace as the year progresses. Final numbers for the year, however, should make 2002 one of the best year for existing-homes on record, the NAR said. The trade association also reported that the national median sales price for an existing single-family home rose to $153,000 in March, an increase of 6.7% over the same month a year earlier, as home values continue to escalate (see related story at right).

Cabinet & Vanity Sales
Sales of kitchen cabinets and bathroom vanities gained ground once again in April, according to the Kitchen Cabinet Manufacturers Association. The Reston, VA-based KCMA noted that manufacturers participating in the association's monthly "Trend of Business" survey reported that cabinet sales in April rose 12.5% over those in April of 2002. Year-to-date sales from January through April were 10.8% over those of the same four-month period a year earlier, with stock cabinet sales up by 12.6% and custom cabinet sales up by 2.7%, the KCMA noted.

Market Analysis

No 'Bubble' Foreseen in Home Prices, NAR Says

Washington, DC Despite considerable attention from the mass media, there is no tangible evidence of a price "bubble" bursting, sending home values plunging from the steadily ascending levels they've achieved in recent years, the National Association of Realtors said last month.

According to the Washington, DC-based NAR, the supply-versus-demand formula the trade association uses to assess the housing market indicates no imminent price bubble, even though the average price of homes has risen significantly even dramatically, in some markets over the past several years.

The national median sales price for an existing single-family home rose to $153,000 in March, an increase of 6.7% over the same month a year earlier. Moreover, many housing markets have witnessed solid double-digit gains in home prices, despite overall economic softness and the uncertainties wrought by world events.

While demand remains high largely due to low interest rates the supply of existing single-family homes "is very low," observed NAR senior forecast economist Lawrence Yun. According to Yun, current supply levels for existing single-family homes are at five months, compared to an average of six months in the 1990s and eight months in
the 1980s.

Another way to view the market, Yun pointed out, is to note if home prices have far outpaced family income. "From 1975 to 2001, the ratio of median home price to family income has been in the fairly tight range of 2.54 to 2.96, with a long-term average of 2.75," Yun said. "In 2001, even with the run-up in home prices, the ratio was 2.80, well within the historical range."

Yun added that "it is comforting to know" that home prices have not declined year to year since the NAR began tracking data in 1968

"There is no housing bubble period," he concluded.