'Slowdown' Gets Mixed Reviews

'Slowdown' Gets Mixed Reviews

While the economy is no doubt slowing, and the housing market weakening, the latest construction-related data is being greeted by mixed reviews from housing analysts, many of whom view the expected slowdown in 2000-2001 as being positive for the market long term. In the meantime, the kitchen and bath industry has apparently not been impacted significantly by recent interest rate hikes and stock market volatility at least based on continued positive shipments of key products such as cabinets and appliances.

Among the key statistics released by government agencies and industry-related trade associations in recent weeks were the following:

Home Sales
Existing home sales, exhibiting increased signs of weakening, fell once again in April, slipping 6.2% to a seasonally adjusted annual rate of 4.88 million, the National Association of Realtors reported. The Washington, DC-based NAR said that despite the decline, however, "the overall [housing] market remains strong," with inventory levels recovering from an "exceptionally limited" first quarter. "The outlook for the housing sector is very bright," observed the NAR, adding that a slower economy and higher interest rates will prove positive in the long run, since "inflation will be kept in check and the economy will be allowed to continue running without slipping into a recession." And, in fact, new-home sales recorded a blistering seasonally adjusted annual rate of 966,000 units in March 6% above last year's "extraordinary" level, the NAR said. "New-home buyers are rebelling in the face of higher mortgage rates, " the trade association noted, predicting "only" a 4.8% decline in new home sales in 2000 compared to last year.

Appliance Shipments
Domestic shipments of major home appliances, showing no signs of slowing, continued to rise from their record pace of 1999, gaining 9.4% in May compared to the same month last year, the Association of Home Appliance Manufacturers reported. According to the Chicago-based AHAM, appliance sales through the first five months of 2000 were also 9.4% over sales for the same period in 1999. Moreover, AHAM said, its latest forecast projects total appliance shipments for the year to increase to nearly 63.6 million units this year, up from the approximately 62.4 million units shipped during the record year in '99 (see graph, above right). 

Cabinet & Vanity Sales
Sales of kitchen cabinets and bath vanities increased 13.1% in May, the Kitchen Cabinet Manufacturers Association reported. The Reston, VA-based KCMA said that manufacturers participating in the association's monthly "Trend of Business" survey also reported that year-to-date sales for the first five months of 2000 posted a 10% increase over the same January-May period in 1999. Sales gains were consistent for stock and custom cabinetry, the KCMA noted.

U.S. Consumer 'Spending Spree' Seen Continuing

Washington, DC The economically and demographically driven "spending spree" currently in evidence among American consumers is apparently far from over even in the face of recent interest-rate hikes and stock market volatility, the National Association of Home Builders said last month.

According to the NAHB, consumer confidence has been "very well maintained" at near-record levels, despite the multiple rounds of Federal Reserve credit tightening and associated stock market problems and this, along with homeowner spending, has significantly fueled the housing, residential remodeling and kitchen/bath markets.

NAHB noted that home prices have been rising steadily, "generating large increases in household wealth that are complicating the Fed's efforts to slow down [consumer] spending."

Despite continued spending and high levels of consumer confidence, however, the interest-sensitive housing sector of the economy has "begun to feel the pinch" resulting from Fed policy and reversals in the stock market," the NAHB added.

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