Housing Reported Off to Solid ’03
The remarkable 2002 performance posted by the
nation’s housing market is apparently continuing in 2003 according
to the first industry-related barometers generated for this year.
Among the key statistics released by government agencies, research
firms and industry-related trade associations in recent weeks were
HOUSING STARTS/HOME SALES
The nation’s home builders remained “solidly optimistic” about
conditions in the single-family housing marketplace in February,
the National Association of Home Builders reported last month. The
Washington DC-based NAHB said that its monthly Housing Market Index
(HMI) was down two points, to a still-healthy 62 reading in
February. The HMI has remained within the same relatively high
three-point range since September of 2002, the trade association
pointed out (see graph at right). Builders began work on new homes
and apartments at a seasonally adjusted annual rate of 1.85 million
units in January, according to Commerce Dept. figures. In addition,
Commerce Dept. figures released last month revealed that more newly
built homes were sold in 2002 than in any other year in history,
with December of 2002 posting the strongest sales pace for any
month on record. Total new-home sales for 2002 reached 976,000, up
7.5% from the previous annual record of 908,000 units, set in 2001.
For the month of December 2002 alone, new-home sales hit a
seasonally adjusted annual rate of 1.08 million units, up 3.5% from
the previous month.
Total existing-home sales, which include single-family, apartment
condominium and co-operative sales, rose in 45 states and the
District of Columbia in the fourth quarter of 2002 compared with
the same period in 2001, the National Association of Realtors
reported last month. In addition, fourth-quarter sales were up 5.8%
from a pace of 6.19 million units recorded in the third quarter of
2002, and were the second-highest level on record, according to the
Washington, DC-based NAR. Association president Cathy Whatley
observed that both demographics and economics are at play in the
strong sales performance (see related story, boxed below).
Regionally, the West reported the strongest annual increase for the
fourth quarter, up 14.8% from the fourth quarter of 2001. In the
Midwest, total existing-home sales were up 9.2% over those in the
fourth quarter of 2001. The Northeast was up 6.8%, and the South
gained 5.1%, the NAR reported.
CABINET & VANITY SALES
Sales of kitchen cabinets and bathroom vanities increased 8.2% in
January compared to the same month a year earlier, the Kitchen
Cabinet Manufacturers Association said last month. The Reston,
VA-based KCMA noted that manufacturers participating in the
association’s monthly “Trend of Business” survey reported that
January declines in sales of stock cabinets (-1.3%) and custom
cabinets (-5.1%) were more than offset by sales of semi-custom
cabinets, which rose 34.4%.
Domestic shipments of major home appliances started 2003 down 3.3%
from the pace set in January of 2002, although a new annual
shipment record is still projected to be set this year, the
Association of Home Appliance Manufacturers reported last month.
According to the Washington, DC-based AHAM, appliance shipments
totaled 3.66 million units in January, off from the 3.78 million
units shipped the same month a year earlier. The declines were most
pronounced in the categories of food preservation (down 12.4%),
home laundry (down 7.5%), and kitchen clean-up (down 6.7%). Despite
the January decline, AHAM is projecting a total of some 69.3
million appliances to be shipped in 2003, compared to shipments of
about 67.9 million units last year.
K&BDN Index Slumps, as Activity
Perhaps unable to sustain the breakneck level
of activity posted in recent months, the kitchen and bath industry
is seemingly pausing to catch its breath, according to an exclusive
monthly Index developed by Kitchen & Bath Design News.
The “Kitchen & Bath Industry Performance Index,” unveiled for
the first time in January by K&BDN, slumped in April to 75.1,
as showroom prospects, appliance shipments, existing home sales and
building permits all dropped below levels posted a month earlier.
The Index was 99.6 in March just a shade under the benchmark of 100
established for January and 95.2 in February.
Fluctuations in the Index, which is based on dealer
surveys and the latest available economic data, are aimed at
providing a regular glimpse at the relative vitality of the kitchen
and bath market.
Among the weighted components comprising this
month’s Index were the following:
Surveyed kitchen and bath retailers reported an
average of 11 sales prospects and seven sales for the month of
January. Although sales were up from December’s levels, prospects
dipped and are now less than half of what they were in the initial
survey last October.
Sales of kitchen cabinets and bathroom vanities
rose 8.2% in January, 2003 over the same month a year earlier, with
stock cabinet sales down 1.3%, custom sales off 5.1% and
semi-custom sales up 34.4%. Kitchen appliance shipments fell 4.9%
in January from the same month a year before, and plummeted 47.7%
from December levels (see Barometers, Page 8).
Aggregate stock prices for firms involved in the
kitchen and bath industry slipped 7.9% in February, 2003, as
investors continued to be uncertain and skittish. The Dow Jones
Industrial Average closed the month down 1.3%, although the NASDAQ
was up 2.4%.
Housing starts in January were 3.6% below those of
December 2002, although the seasonally-adjusted rate of starts was
1.85 million, 8.0% above the pace for January, 2002. However,
building permits, an indicator of future housing activity, dropped
Existing-home sales declined 23.6% from December to
January. At the same time, new-home sales dipped 2.1%.
The Consumer Confidence Index dipped slightly in
January from December levels. Consumers’ expectations for the next
six months were also less optimistic than at year-end. Those
anticipating business conditions to sour over the next six months
rose to 14.0% while those anticipating an improvement in the
economy declined to 17.7%. Those rating current business conditions
as “good” increased to 15.0%. However, those holding the opposite
view edged up to 26.5%.
Unemployment dipped to 5.7% in January. However,
20.9% of the consumers in the Consumer Confidence survey expected
fewer jobs in the coming six months, an increase over the previous
month, while only 14.3% anticipated more, a slight decline from
The national average commitment for a 30-year,
conventional, fixed rate mortgage at press time was a record low
5.67%, leading to positive expectations for both home buying and
Positive Interest Rate Outlook Seen
Boosting Home Sales
Washington, DC Mortgage interest rates should
remain favorable and help sustain strong levels of home sales this
year, according to David Lereah, chief economist for the National
Association of Realtors.
Lereah said last month that weak economic growth at
the end of 2002 means it will take a little longer for momentum to
build this year. However, Lereah added, “the silver lining” will be
a continuation of affordable mortgage interest rates, particularly
in the first half of the year, “which will help to sustain the
strong momentum we currently have in the housing market.”
Lereah said he expects the 30-year fixed mortgage
interest rate to average 6.2% during the first half of 2003, before
rising to 6.6% in the fourth quarter.
The Washington, DC-based NAR is projecting 5.4
million existing-home sales in 2003, second only to the 5.56
million sales posted in 2002. At the same time, the NAR said it
expects 959,000 new-home sales, down modestly from a record 976,000
sales last year. Housing starts are forecast at 1.69 million units
this year, also slightly below the 1.71 million units recorded in
Lereah also forecast that recent sharp increases in
existing-home prices are expected to slow this year, but with a
persistence of lean inventories of homes available for sale, it
should continue to rise at a rate above historic norms.
“We expect the median existing home price to
increase 4.8% in 2003,” Lereah commented.