Housing Resilient In Face of Downturn

by WOHe

Housing Resilient In Face of Downturn


The housing and kitchen/bath markets, while perhaps flattening
modestly, apparently remain remarkably resilient in the face of the
overall slowdown affecting many sectors of the U.S. economy,
particularly manufacturing. 

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 rose 4.6% in May
over those in May of 2000, according to the Kitchen Cabinet
Manufacturers Association. The Reston, VA-based KCMA said last
month that manufacturers participating in the association’s monthly
“Trend of Business” survey reported that year-to-date cabinet sales
through the first five months of 2001 were up 5.3% over those of
the same January-May time period last year. Sales of stock cabinets
year-to-date were up by 4.2%, while sales of custom cabinets were
up by 12%, the KCMA further noted.

Appliance Shipments
Domestic shipments of major home appliances continued their
downward pattern for 2001 in May, declining by 3.1% compared to May
of 2000, and remaining well behind last year’s record pace, the
Association of Home Appliance Manufacturers reported. According to
the Washington, DC-based AHAM, year-to-date appliance shipments
through May totaled some 26.36 million units, 7.1% below the total
recorded for the January-May time period last year. Appliance
shipments are on a pace to total just under 63 million units for
the year, off the record total of about 65 million units shipped in
2000. Despite the drop, however, the totals predicted for 2001
would make this year the second-best appliance-shipment year on
record, according to AHAM. The association is forecasting a
rebound, projecting that appliance shipments will reach 64.1
million units in 2002.

Existing-Home Sales
The latest numbers tracking sales of existing single-family homes
still pacing at a rate of more than 5 million units annually are “a
reminder of just how strong the housing market has been during the
recent economic pullback,” the National Association of Realtors
said last month. Pointing to recent resales and other housing
industry indicators, such as mortgage applications, the Washington,
DC-based NAR pointed out that housing “continues to be a popular
investment choice” among U.S. consumers. “Defying all odds, the
housing industry keeps fighting off the economic slowdown,” the NAR
said, cautioning, however, that a weakening employment picture may
weaken home sales as the year progresses.
Housing Starts

The “resilience” of the U.S. housing market, even in the face of
weakness in other parts of the economy, is being confirmed by the
latest round of statistics reflecting housing starts, home sales,
permits and home-buyer traffic, the National Association of Home
Builders reported last month. Even though housing has eased off its
formerly torrid pace in recent months, and is apparently
flattening, the industry as a whole “has been outperforming many
other parts of the economy,” the Washington, DC-based NAHB said.
The NAHB also pointed to its latest survey of home builders, which
indicates growing optimism and healthy levels of buyer traffic.
Also of note, said the trade association, is that “in the midst of
all the turmoil in the economy and housing markets, the U.S.
homeownership rate held at 67.5% in the first quarter of 2001 just
shy of the all-time high in the third quarter of 2000.”

Market Analysis

Consumer Sector Seen ‘Saving
Economy’
Dallas A strong consumer sector, and
continued discretionary spending, will keep the nation from
slipping into recession although the U.S. construction industry as
a whole should prepare for a slowdown as the business sector
continues to soften, a leading economist told construction industry
executives here in late June.

Economist Raymond Torto, managing director of Boston-based Torto
Wheaton Research, pointed out to construction industry leaders that
the nation experienced “an extraordinary period” of growth and
prosperity in the late 1990s, and noted that 2000 “was the party
that gave us the hangover we are now suffering from.

“It would be totally incorrect to look back on [the recent]
three-to-five-year cycle and expect the economy to come out of its
[current] soft landing next year and perform as it has in the
past,” cautioned Torto, who spoke at a gathering organized by CMD,
a leading provider of construction industry information.

Torto advised his audience to “buckle down, keep your business
in line with reality and your expectations in line with
reality.”

He noted, however, that while the current U.S. economic slowdown
will be significant, and the business sector will remain weak
through the end of this year, there will not be a recession thanks
primarily to the consumer sector.

A consumer sector strengthened by low interest rates and the
impending tax cut “will save the economy from recession as more and
more people create discretionary income by lowering their mortgage
rates through refinancing,” Torto observed.

“That has a dramatic effect on the economy,” he said.

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