Market Conditions Solid, and Improving

by WOHe

Market Conditions Solid, and

The housing industry continues to be a virtual pillar of
strength for the U.S. economy, with results continuing to remain
positive at mid-year. Among the key statistics released by
government agencies, research firms and industry-related trade
associations in recent weeks were:

Builder confidence in the
market for new single-family homes rallied in May, the National
Association of Home Builders (NAHB) reported last month. NAHB’s
Housing Market Index (HMI), a monthly gauge of builder sentiment,
rose four points to 56 in May, regaining much of the ground it lost
earlier this year. NAHB chief economist David Seiders noted that
home builders “are on track for a very healthy year in 2003 as the
market for new single-family homes continues to exhibit stability
and strength.” Seiders said the NAHB is forecasting that new-home
sales and starts will be essentially on par with last year’s
“solid” numbers.

Sales of both
new and existing homes were slightly above their first-quarter
averages in April, and the fundamentals of the housing market
“continue to exhibit remarkable strength looking forward,” said
Seiders. “With inventories of unsold new homes remaining at a
healthy level, with impressive house-price performance on a
year-over-year basis, with significant optimism among builders (and
with) the terrific interest rate picture, all systems are ‘go’ for
home sales.

Domestic shipments of
major home appliances rose again in April, and were running well
ahead of the record-setting pace of 2002, the Association of Home
Appliance Manufacturers reported last month. According to the
Washington, DC-based AHAM, April appliance shipments were up 7.3%
over those of April 2002, and year-to-date shipments for the first
four months of 2003 were 6.8% ahead of those for the same
four-month period last year. Appliance shipment gains in April,
however, were led largely by increases in home comfort products. By
comparison, January-April shipments of key kitchen goods such as
cooking, cleanup and food preservation products were running about
even with year-to-date shipments in 2002, according to AHAM.
Nevertheless, the association’s latest forecast, issued last month,
projects shipments of some 68.6 million appliances this year,
eclipsing last year’s record of 67.9 million units (see related
graph, above right). Additional gains are projected for 2004, AHAM
said, noting that the increases should be posted across all key
product categories.

Shipments of
decorative overlays will witness an easing of overall growth in the
near-term, but should see strong upward growth over the coming
decade, according to a recent research study conducted by George
Carter & Affiliates (GC&A) and Resource Information Systems
(RISI). The study projects that North American decorative overlay
shipments will increase 46% between 2002 and 2012, to nearly 22
billion sq. ft. This “impressive growth,” researchers said, will be
driven by growth in saturated papers (59%), low-basis-weight papers
(49%) and decorative foils (44%). The GC&A and RISI study
included forecasts for shipments of particleboard and MDF typically
used for cabinets and furniture as well as for other products
commonly used in kitchens and baths, including high-pressure
laminate, thermofused melamine, saturated papers, decorative foils,
low-basis-weight papers and vinyl films. The forecast also includes
an analysis of laminate flooring. The team of the Hillsdale,
NJ-based GC&A and RISI estimated that the volume of laminate
flooring, which rose to more than 520 million sq. ft. of product in
2002, will nearly double within the next 10 years.

Market Conditions Solid, and Improving

The “Kitchen & Bath Industry Performance Index”
remained strong this month. The Index an exclusive monthly gauge of
business developed by Kitchen & Bath Design News was at 101.17
this month, just a hair off the pace set last month, when the Index
reached its highest level to date. It started the year at a
benchmark level of 100, and had declined to a low of 75.1 in

Fluctuations in the Index, which is based on dealer
surveys and the latest economic data, are aimed at providing a
snapshot of the relative vitality of the kitchen and bath market
(see Editor’s Note, below).

Among the weighted components comprising this
month’s Index were the following:

  • Surveyed kitchen and bath retailers reported an
    average of 18 prospects and seven sales for the month of April. The
    average number of prospects was even with those reported for the
    previous month, but the average number of sales was up 42.9% from

  • Survey respondents reported that the average price
    of a kitchen remodeling job booked during the month was $17,619,
    and the average price of a bathroom remodeling was $6,850. These
    prices have been declining since early 2003, indicating that
    mid-range and low-end buyers are back in the market.

  • The Consumer Confidence Index, as measured by The
    Conference Board, increased 31.9% to 81.0 in April and jumped to
    83.8 in May (1985=100). The “Expectations” Index for May rose to
    94.4 but the “Present Situation” Index fell to 67.9.

  • Unemployment, however, increased 3.4% in April to
    6.0%. and jumped again in May to 6.1%. Consumers in the Conference
    Board’s survey anticipating more jobs to become available over the
    next six months increased to 17.8%, while those expecting fewer
    jobs in that span fell to 17.6%.

  • Existing-home sales in April surged 14.9%, to
    510,000 units, which translated to a seasonally-adjusted annual
    rate of 5.84 million units. All four regions of the country were
    above last month’s pace, and all but the Northeast were ahead of
    the pace for April, 2002. In 2003, nearly 1.65 million existing
    homes have been sold.

  • Housing starts were up 1.5% in April, to 151,900
    units started. That translated to a seasonally-adjusted annual rate
    of 1.63 million units, according to the U.S. Census Bureau. The
    nation showed gains in single-family housing production in three
    out of four regions, with more than 128,600 single-family homes
    started during the month.

  • April kitchen cabinet sales increased 9.2% over the
    same month last year, according to the latest Trend of Business
    survey from the Kitchen Cabinet Manufacturers Association.
    Responding cabinet manufacturers showed a 9.7% sales increase for
    the first four months of 2003 over the same period last year.

  • New-home sales slipped in April to 95,000 units
    sold, notes the Census Bureau. However, that translated to a
    seasonally-adjusted annual rate of 1.03 million units. Through four
    months, some 352,00 new homes have been sold, up 8.0% over the same
    period of 2002.

  • April shipments of major home appliances dipped
    30.9% to just 3.06 million units according to the Association of
    Home Appliance Manufacturers, but that level was 1.0% over April of

  • Stocks associated with the kitchen and bath
    industry recorded another month of solid advances in May, as a
    growing number of U.S. companies reported improving

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