1998 Momentum Helping New Year

by WOHe

1998 Momentum Helping New Year

The positive momentum generated by a robust 1998 will probably
carry over well into 1999, although the growth rate of key kitchen
and bath industry barometers is facing an inevitable slowdown,
according to housing and industry-related analysts. While 1999
should be another favorable year, analysts say, such key market
forces as housing starts and home sales are expected to weaken from
their torrid ’98 pace, dampening kitchen and bath product shipments
– even as those shipments remain at historically high levels.

Among the industry’s key statistical-related developments in recent
weeks were the following:

Existing-Home Sales
1999 will witness a slowdown in existing-home sales from the
“amazing” record pace of last year, but sales this year will
“remain stronger” than those of any year on record outside of 1998,
the National Association of Realtors reported. According to the
Washington, DC-based NAR, last year’s record sales pace of more
than 5.0 million existing homes will slow down over the next couple
of years, along with overall U.S. economic growth. “However, don’t
fret too much; consumers will have affordability on their side,
given the favorable outlook on mortgage rates,” commented the NAR,
which is forecasting gradually falling mortgage rates.

New-Home Sales
The fundamentals behind buyer demand continue to be “very strong,”
as high consumer confidence and low interest rates continue to fuel
new-home sales, the National Association of Home Builders reported.
The Washington, DC-based NAHB reported that the record level of
new-home sales posted in 1998 has helped push the nation’s
homeownership rate to an all-time high of 66.8%. Though the NAHB –
which forecasts a 7% decline – expects the market to slow down, it
“still expects 1999 to be the second best year on record” for
new-home sales. The NAHB pointed to several factors leading it to
conclude that while 1999 should have a “solid” beginning, a
“moderate slowdown” will extend into the year 2000. Factors include
potential stock market reversals, a credit tightening, the global
economic slowdown and a job growth slowdown.

Appliance Shipments
Domestic shipments of major home appliances reached record numbers
in 1998, posting record numbers for most product categories, noted
the Chicago-based Association of Home Appliance Manufacturers.The
AHAM reported that a total of 56.6 million appliances were shipped
in 1998, up 10.2% over 1997. Among the kitchen product categories
exhibiting the sharpest year-to-year gains were gas surface cooking
units (+20.1%), electric surface cooking units (+13.3%),
refrigerators (+10.7%), free-standing electric ranges (+9.6%),
disposers (+6.9%) and dishwashers (+6.6%), the AHAM
added.

Conflicting Forces Seen
Impacting U.S. Remodeling

Cambridge, MA – Residential remodeling trends are
largely based on two “strong, but conflicting” factors that,
balanced, should prove favorable for continued industry growth,
claims Harvard University’s Joint Center for Housing Studies.

The Joint Center – which runs a “Remodeling Futures Program” that
examines trends in residential renovation – reports that growth in
remodeling expenditures slowed in ’98, only rising 1.5% over the
year before. But, remodeling is still key to total U.S. residential
investment, “enabling homeowners to maintain and adapt their homes
to changing demographic and economic circumstances,” the Joint
Center noted.

Two conflicting trends, however, seem to be impeding even faster
growth. While consumer confidence and job growth have begun to
ease, low financing costs have continued to encourage home
improvement.

“Homeowners are less comfortable undertaking larger remodeling
projects when they’re concerned with future economic conditions,
[yet] low financing costs have kept existing-home sales strong,
[thus], encouraging remodeling,” says Kermit Baker, project
director of the Remodeling Futures Program.

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