2002 Finishing Strong Despite Economic Woes

by WOHe

2002 Finishing Strong Despite Economic

Despite the deterioration in the stock market, the sluggish
economic recovery, and declining consumer confidence resulting from
global and domestic uncertainties, the housing industry and related
kitchen/bath sector are on the verge of posting an enormously
successful year as 2002 winds to a close. Among the key statistics
released by government agencies, research firms and
industry-related trade associations in recent weeks were the

Continuing problems in the stock market coupled with falling
mortgage rates have continued “to buoy the single-family housing
market, stimulating home sales and maintaining upward pressure on
home prices,” the National Association of Home Builders observed
last month. According to David Seiders, chief economist for the
Washington, DC-based NAHB, the combination of strong home prices
and low mortgage rates has bolstered home equity levels and
prompted high levels of home refinancing “a process that has
unleashed huge amounts of funds to support consumer spending, as
well as the pay-down of higher-cost forms of debt.” Housing starts,
fueled by single-family construction, surged to an annual rate of
1.84 million units in September, the highest rate since June of
1986, the NAHB reported. For single-family starts, the rate was the
highest since November, 1978, the association added.

The availability of credit resulting from low mortgage rates “will
continue to support” home price appreciation and the sales of
existing homes, with 2002 proving to be a record year for resales,
the National Association of Realtors said last month. The
Washington, DC-based NAR said that its analysts were predicting a
record total of 5.44 million existing-home sales for the year, up
from the record of 5.3 million sales set in 2001. Likewise, home
prices experienced above-normal appreciation, with a national
median existing-home price of $163,600 in August a 6.4% increase
from August of 2001 the NAR reported.

Kitchen cabinet and bathroom vanity sales gained 12.9% in
September, the Kitchen Cabinet Manufacturers Association said last
month. The Reston, VA-based KCMA noted that manufacturers taking
part in its monthly “Trend of Business” survey reported that stock
cabinet sales were up 13% in September, while semi-custom sales
rose 20.7% and custom cabinet sales posted a 5.3% decline.
Year-to-date sales from January through September were up 11.4%
over the same nine-month period a year earlier, the KCMA added.

Domestic shipments of major home appliances through September were
running 5.1% higher than the same nine-month period in 2001, as
appliance shipments continued to head toward a new annual record,
the Association of Home Appliance Manufacturers reported. Appliance
shipments through September were running ahead of last year in
virtually all product categories including cooking, kitchen
clean-up, food preservation and home laundry according to the AHAM.
The Washington, DC-based trade association has forecast that 2002
shipments should total some 67.5 million units, up from last year’s
total of 64.6 million units. Appliance industry shipments have
grown annually nearly every year since 1991 a year in which some 40
million appliances were shipped domestically.

Market Analysis

Investment in Housing Seen Increasing Sharply This

Chicago Single-family housing investment and mortgage debt will
more than double in this decade, as a series of factors continues
to favorably impact the U.S. housing market, according to a leading

David Berson, v.p. and chief economist for Fannie Mae, told
attendees of the National Housing Conference held here in October
that several key economic and demographic factors will lead to
continued growth in housing investment through 2010. That growth,
fueled in large part by low interest rates, should create high
levels of housing starts, home sales and mortgage originations,
Berson said (see graphs above).

The economist said that housing starts should average between
1.64 million and 1.68 million units annually through the end of
this decade, compared to an average of 1.41 million in the 1990s
and 1.48 million in the 1980s. At the same time, new-home sales
should average between 910,000 and 930,000 units per year (compared
to 730,000 units per year in the 1990s and 610,000 units per year
in the 1980s), while existing-home sales are projected to average
between 5.5 million and 5.64 million units per year through the end
of the decade (compared to 4.21 million units in the ’90s and 2.98
million units in the ’80s).

Berson attributed the projected growth to four key factors:
household formations, which will continue to grow at 1990s’ rates;
homeownership, which will continue to be boosted by aging Baby
Boomers, minorities and immigrants; home price appreciation, fueled
by strong demand and weak supply, and homeowner debt-to-value

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