Slowdown Seen As Only Modest

Slowdown Seen As Only Modest

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

Existing-Home Sales
The pace of existing single-family home sales "has been relentless," even in the face of increases that have seen mortgage rates rise to levels that are about 1.5% higher than a year ago, the National Association of Realtors said last month. According to the Washington, DC-based NAR, the latest figures for resales reflect an annualized level in 2000 that would make the year the third-best year ever for existing single-family homes. Existing-home sales were down 9.8% in the first quarter of 2000, compared to the record-setting pace of a year ago. Despite the decline, and recent interest rate increases, home sales "continue to be brisk," said the NAR, adding that it expects "a busy summer for the housing sector" thanks to "steady consumer demand."

Appliance Shipments

Cabinet & Vanity Sales
Sales of kitchen cabinets and bathroom vanities rose 4.3% in April over the same month in 1999, 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 sales were up 9% in the first four months of 2000 compared to the same January-April period last year.

Home Prices
The price of new homes continue to rise in part, due to the continued strength of the housing market and, in part, due to a continued increase in the level of amenities in new homes, the National Association of Home Builders reported last month. the Washington, D.C.-based NAHB noted that the average sales price of new homes rose 6% between the first quarters of 1999 and 2000, although the "quality-adjusted" index of new-home prices rose only 2% in the same period.


Interest Rate Hikes Seen Cooling Housing Market

Washington, DC With the cost of borrowing expected to rise as interest rates increase, housing production will gradually slow to about 1.6 million units this year down from the "exceptionally strong" 1.68 million homes that were started in 1999, the National Association of Home Builders predicted.
Housing analysts at the recent 60th Semiannual Construction Forecast Conference here said that a healthy, sustainable growth rate for the U.S. economy would be in the 3.5%-4% range this year well behind the 7.3% rate of GDP growth in last year's final quarter and the 5.4% rate at which the economy expanded in the first quarter of 2000.

"The Fed cannot be beaten," said NAHB chief economist David Seiders, adding that the Federal Reserve will likely implement several additional interest rate hikes by this fall, increasing rates on long-term, fixed-rate mortgages to 8.75% and "making it more difficult for buyers at the low end of the market to qualify for a loan."

Those expected interest rate hikes, Seiders said, will likely slow housing production both this year and in 2001, when housing starts should decline to about 1.5 million units.

"But those are still big numbers," Seiders said of housing projections for 2000 and 2001.

According to Joseph Hu, director of research for Standard & Poor's, increases in home equity financing could have serious repercussions for the economy as the Fed continues to push up interest rates.

Hu noted that 68% of today's homeowners have at least some house-related debt 28% higher than just 10 years ago while the greatest portion of those borrowers (43%) are using the money to make home improvements. In contrast, 21% are using the money for debt consolidation, 8% for investment, 6% for education, and 5% for vehicle purchases and maintenance.

As the Federal Reserve tightens its grip on monetary policy, both housing activity and equity financing will eventually decline, Hu noted, warning that "this could have more impact than the Fed intends because the amount of money involved in equity financing is huge."

However, despite the projected slowdown in housing production this year and next, nearly as many homes will need to be built in the current decade as were built in the 1990s about 16.5 million said Eric Belsky of Harvard's Joint Center for Housing Studies.

Looking at regional markets, analysts at the conference noted that strong economic conditions exist across the country, but they added that the strongest housing markets are in the Mountain and Southeast regions, as a result of fast job growth.

This year, as a national housing slowdown begins, all states will likely see declines in home construction, with the largest declines occurring in areas where job growth is limited by labor constraints, analysts concurred. The smallest declines in housing starts will be seen in the "late recovering" states, including those in the Northeast, upper Midwest and West, analysts added.


Shipments of Plumbing Fixtures Increase in 1999

Washington, DC Unit shipments of plumbing fixtures rose in 1999 over 1998, the latest U.S. government statistics reveal.

According to figures released recently by the Census Bureau, some 28.4 million fixtures were shipped during 1999, up 3.5% over a year earlier. The shipments had a total value of $2.65 billion, a 7.7% increase over 1998.

For the year, the toilet category posted the largest percentage gain, rising 10%, to 7.8 million units, with a value of $402.1 million. 

Gains were also recorded in shipments of lavatories (up 5.9% to 1.9 million units, with a value of $443.8 million); whirlpool tubs (up 2.3% to 557,982 units with a value of $417.1 million), and bathtubs (up 0.8% to 4.1 million units valued at $217.2 million).

In contrast, the government reported, declines were recorded in the areas of shower stalls (down 2.2% to 917,086 units valued at $217.2 million); kitchen sinks (down 2.3% to 5.68 million units worth $397.4 million); tub surrounds (down 9.4% to 920,982 units with a value of $76.1 million), and bidets (down 23% to 35,056 units valued at $6.7 million).


Shaky Market Sees Stocks Fall

A generally quiet Wall Street, characterized by low volume, volatility and interest rate fears, saw stocks associated with the kitchen and bath market slip once again in May.

The performance of 51 key stocks of building products manufacturers, distributors, retailers and e-commerce enterprises as tracked in Kitchen & Bath Design News' exclusive monthly Stock Index slid 69.83 points, or 2.60%, to close the trading period from April 1 to May 1 at 2613.51.

In similar fashion, the Dow Jones Industrial Average fell 159.58 points, or 1.48%, to end the session at 10652.20. Of the 51 stocks tracked by K&BDN, declining issues outpaced advancers by a 36 to 15 count; eight of the stocks fell to new annual lows, while only one climbed to a new 52-week high.

Homestore.com and American Standard were among the top gainers for the period; Whirlpool Corp., Black & Decker and Home Depot were among the biggest losers.

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