Market Continues On Growth Curve

by WOHe

Market Continues On Growth Curve

Driven by a robust housing market that continues to run counter
to the still-sluggish U.S. economy, the kitchen and bath industry
is demonstrating continued growth as the second half of 2002 gets
underway. Among the key statistics released by government agencies
and industry-related trade associations in recent weeks were the

Indicating that the nation’s housing market “continues to provide a
crucial source of strength to the national economy,” sales of new
single-family homes surged 8.1% in May, to a record high
seasonally-adjusted annual rate of 1.03 million units, the Commerce
Dept. reported. “Low interest rates and the solid investment
potential of homes are encouraging more buyers than ever to go
forward with a new home purchase,” said Gary Garczynski, president
of the National Association of Home Builders (NAHB). Garczynski
noted that in the first 12 months after purchasing a newly built
home, owners spend an average of $8,900 to furnish, decorate and
improve their investment. New-home sales rose in every region of
the country in May, the latest figures reveal. Rebounding from a
previous dip, the Northeast posted the biggest gain, 26.4%, while
the South, West and Midwest posted more moderate gains of 10.6%,
4.3% and 2.7%, respectively, the government said. “We expect a
healthy pace of sales through the second half of the year,”
Garczynski further noted.

Housing starts for 2002 should wind up posting a gain over the
strong year experienced in 2001, according to the latest forecast
from the National Association of Home Builders. The Washington,
DC-based NAHB forecast last month that about 1.64 million units
will be constructed by the nation’s home builders this year, up
2.5% from last year. “While we may see some tapering off from this
high rate of housing production in months to come, it’s clear that
the housing component of Gross Domestic Product is still providing
good support to the budding economic recovery,” said NAHB chief
economist David Seiders. The NAHB attributed the impressive housing
performance largely to favorable mortgage rates, coupled with
“strong house-price performance that has bolstered the investment
potential of homes at a time when investments in the stock market
have been performing badly,” Seiders noted. A report issued in June
by the Joint Center for Housing Studies at Harvard University
projected that the U.S. housing market will continue to grow, and
home prices will continue to rise, for the next two decades.

Sales of kitchen cabinets and bathroom vanities, mirroring growth
throughout the industry, rose again in May, 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 May cabinet sales
gained 12% over sales in May of 2001. Year-to-date sales from
January through May were up 11% over the same five-month period a
year earlier, with stock cabinet sales up by 12.6% and custom
cabinet sales up by 3.6%, the KCMA added.

Domestic shipments of major home appliances surged 14% in May over
the same month in 2001, and are on pace to shatter the all-time
record for annual sales, the Association of Home Appliance
Manufacturers said last month. The Washington, DC-based AHAM
projected that 2002 appliance shipments will total just shy of 66.6
million units, up significantly from the 64.6 million units shipped
in 2001, and well over the record 65 million units shipped in 2000.
AHAM also projected a gain in 2003, to 67.5 million units (see
graph above). The May increases, posted across virtually all key
appliance categories, brought year-to-date shipments through the
first five months of 2002 to 28.29 million units, up 7.3% over the
26.35 million units that were shipped from January through May of
2001, AHAM said, adding, “The most significant increases during May
were in food preservation products (up 12.2%), cooking equipment
(up 9%) and kitchen clean-up (up 7.8%).”

Market Analysis

Second Home Market Projected to Grow

Washington, DC Sales of second homes, including both vacation
homes and investment properties, remain well above historic norms,
with housing analysts expecting that trend to remain a reality into
the foreseeable future.

That’s the word from the National Association of Realtors, which
reported in June that 5.5% of all single-family homes sold in 2001
were second homes.

The construction and resale of these second homes, analysts
point out, could have a major impact for home builders and
remodelers working in areas that are widely viewed as attractive
locations for such homes. These areas include Florida, California,
Texas, Michigan, Maine, Vermont, New Hampshire, Alaska, Delaware,
Wisconsin and Arizona, among other states.

“Second homes have enjoyed a healthy pace in recent years, due
to demographic demand and increases in household income,” the
Washington, DC-based NAR observed.

In fact, according to the trade association, the demographic
impact alone from large numbers of people in their 40s and 50s
entering the second-home market could potentially add 100,000 to
150,000 housing starts each year through the end of the decade.

The typical second-home buyer is the same core buyer as the
person who represents the core of today’s kitchen and bath market:
It’s a middle-class Baby Boomer, aged 46, married in most cases,
and with a median household income of $77,700.

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