Gains Seen Despite Recession, Sept. 11

by WOHe

Gains Seen Despite Recession, Sept. 11


The kitchen/bath and housing industries demonstrated enormous
resiliency throughout 2001, posting gains in key economic
indicators and product sales despite an overall economic slide and
the shock of the Sept. 11 tragedy, according to a year-end wrap-up
of figures. Among the key statistics released by government
agencies and industry-related trade associations in recent weeks
were the following:

Cabinet & Vanity Sales
Sales of kitchen cabinets and bathroom vanities held up well in
2001, despite a faltering economy and the Sept. 11 terrorist
attacks, the Kitchen Cabinet Manufacturers Association said last
month. The Reston, VA-based KCMA, in its year-end summary, said
that manufacturers participating in the association’s monthly
“Trend of Business” survey reported that cabinet sales rose again
in December compared to the same month a year earlier, and totaled
$4.7 billion for 2001 an increase of 7% over 2000. Stock cabinet
manufacturers saw sales rise 6.9% for the year, while suppliers of
custom cabinets posted annual sales gains of 7.6%, the KCMA said.
KCMA survey participants include stock and cabinet manufacturers
who represent more than 50% of the total U.S. cabinet market,
according to the KCMA.

Housing Starts
Reflecting “the remarkable resilience” of the nation’s housing
market in a turbulent year, U.S. housing starts rose 2.2% in 2001,
to a “healthy” 1.6 million units, the National Association of Home
Builders (NAHB) reported last month. At the same time, sales of
newly built homes hit a record high 900,000 units last year, up
from 877,000 units in 2000. “Housing clearly showed surprising
strength amid some tough economic times in 2001,” said Bruce Smith,
president of the Washington, DC-based NAHB. The NAHB reported that
single-family housing starts rose 3.6% in 2001, to 1.275 million
units the second highest figure in more than a decade, after 1999’s
exceptionally strong 1.3 million units. Multi-family starts fell
almost 3%, to 328,000 units in 2001, the NAHB noted, adding that
total starts were up in all regions but the Northeast. Citing
“favorable financing conditions, improving consumer confidence and
solid demographics” as the three key factors sustaining demand for
new homes, Smith said that these same market fundamentals should
signal continuing improvement in 2002. He also pointed to “good
house-price performance, a low inventory of unsold homes and
resilient buyer demand as factors in the housing market achieving a
complete rebound” to pre-recession activity levels. “Given that the
average home buyer spends $8,000 in housing-related furnishings and
property alterations in the year following a new-home purchase,
consider the tremendous stimulus that record home sales are already
providing to this country’s GDP and employment base,” Smith

Existing-Home Sales
Existing-home sales dropped slightly in December of 2001, but still
managed to set an all-time record for the year, hitting 5.25
million units, the National Association of Realtors reported last
month. According to the Washington, DC-based NAR, the 2001 numbers
were up 2.7% from the 5.11 million existing homes that were sold in
2000, and topped the previous record, set in 1999, of 5.21 million.
The NAR also noted that price appreciation for homes remained
strong, with the median price for an existing home rising 8.4% from
a year earlier, to $151,400.

Appliance Shipments
Buoyed by record shipments of refrigerators, dishwashers, ranges
and microwave ovens, shipments of kitchen appliances rose a healthy
20.6% in December, helping to yield a new annual record of 42.14
million units, the Association of Home Appliance Manufacturers
(AHAM) reported last month. The Washington, DC-based AHAM
forecasted that appliance shipments are expected to decline
somewhat this year, but noted that the industry is still expected
to post the third-best year in its 
history in 2002.

Market Analysis

Recession Viewed Overall as Mild, Fading

Atlanta The economic recession that began in March of 2001 is
likely to have ended by the time the second quarter of this year
rolls around, “and it’s going into the books as the mildest” in
post-World War II history.

That was the thumbnail analysis of the housing market and U.S.
economy issued at last month’s International Builders Show here by
National Association of Home Builders chief economist David

According to Seiders, a variety of economic indicators including
recent reports of positive GDP growth and continued solid levels of
consumer confidence suggest that the economy “is in the process of
changing from recession to recovery.”

However, home builders and others associated with the building
products market shouldn’t notice too much improvement in the year
ahead, he advised primarily because housing activity was barely
affected by the downturn in the first place (see related story,

David Berson, chief economist for Fannie Mae, observed that
increases in long-term mortgage rates should be only modest this
year, and are expected to average 7.2% for 2002 compared to 6.78%
in the final quarter of 2001.

Berson noted that, thanks to low interest rates and “healthy
appreciation” in home prices, homeowners were able to refinance
some $1.1 trillion of housing debt last year about $500 million of
which was spent providing a significant stimulus to the lagging
U.S. economy.

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