Early Stages of Recovery Seen for Housing

by bkrigbaum@solagroup.com

The nation’s housing market is apparently in the early stages of a recovery that is likely to be slow and occasionally choppy, according to the latest economic indicators. Among the key statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

Stability is slowly returning to the housing market following declines that were posted after the expiration of home-buyer tax credits and the slowdown of economic growth this summer, the National Association of Home Builders reported last month. The Washington, DC-based NAHB reported that home builders are seeing a rise in interest among potential buyers, although “a major limiting factor for a housing recovery continues to be builders’ inability to access credit for new construction,” the trade association said.

The housing market is currently “in the early stages of recovery,” based on the latest figures for sales of existing homes, the National Association of Realtors commented last month. Existing-home sales jumped 10% to a seasonally adjusted annual rate of 4.53 million in September, although they remain 19.1% below the 5.60 million-unit pace in September 2009, when first-time buyers were ramping up in advance of the initial deadline for the tax credit last November. “A housing recovery is taking place, but will be choppy at times depending on the duration and impact of a foreclosure moratorium,” said Lawrence Yun, chief economist for the Washington, DC-based NAR. However, Yun said, “the overall direction should be a gradual rising trend in home sales with buyers responding to historically low mortgage interest rates and very favorable affordability conditions.”

Domestic shipments of major home appliances continued their modest year-to-date gains through September, even though shipments for the month declined compared to those of September, 2009, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that year-to-date shipments through September totaled 47.69 million units, up 2.9% from the 46.33 million units shipped during the same nine-month time period last year. September shipments fell 2%, compared to the same month last year, AHAM said.

Sales of kitchen cabinets and bathroom vanities declined again in September compared to the same month a year earlier, the Kitchen Cabinet Manufacturers Association said last month. According to the Reston, VA-based KCMA, manufacturers participating in the association’s monthly “Trend of Business” survey reported that overall cabinet sales fell 7.1% in September, compared to September of 2009. Sales of stock cabinets declined 10.9%, while semi-custom sales fell 1.4% and custom cabinet sales declined 15.5%, the KCMA reported. Year-to-date sales through the first nine months of 2010 were down 1.7% compared to the January-September period of 2009, the KCMA added.

Market Analysis

Stronger Growth Projected in 2011
For Residential Remodeling Market

Cambridge, MA — Substantive growth in remodeling spending, reversing a three-year decline, seems likely in 2011, according to the Leading Indicator of Remodeling Activity (LIRA) released last month by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

Even though spending is still below its 2007 peak, the latest in a quarterly series of Joint Center studies indicates that homeowner improvement spending is expected to be up at a double-digit pace at an annual rate through the first half of 2011 (see related graph, right).

“The downturn in home improvement activity has pushed spending below its long-term trend,” said Eric Belsky, managing director of the Joint Center. “A recovering economy should stabilize house prices and consumer confidence levels, encouraging homeowners to reinvest in their homes and undertake deferred repairs and replacements.”

“Remodeling contactors are feeling much more positive about the outlook for home improvement projects,” added Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “Low financing costs and a wave of previously foreclosed homes coming back on the market, and in need of renovation, are expected to generate healthy growth over the next several quarters.”

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