Market Off Record Highs, But Still Solid

by WOHe

Market Off Record Highs, But Still Solid

The housing market may be cooling down a bit from its torrid,
and unsustainable, 2003 pace, but the market for the construction
of new homes and the sales of both new and existing homes is
remaining robust. Among the key statistics released by government
agencies, research firms and industry-related trade associations in
recent weeks were the following:

Unusually bad
winter weather across much of the country was at least partially
responsible for a dampening of housing activity in February,
although the outlook for housing “remains quite good heading into
the spring home buying season,” the National Association of Home
Builders said last month. The NAHB’s Housing Market Index (HMI) the
association’s monthly gauge of single-family builder confidence
stood at its lowest level in February since July of 2003. “The
new-homes market is still doing well, thanks to excellent financing
conditions, great buyer demographics and improving economic
indicators. The Washington, DC-based NAHB has anticipated a
slowdown from the record pace of new-home sales in the final months
of 2003, and the latest HMI “indicates builder expectations are
consistent with that,” the association said.

Sales of existing
single-family homes were down in January from near-record highs,
but remain “exceptionally strong,” according to the National
Association of Realtors. The Washington, DC-based NAR made its
comments after the latest figures revealed that existing-home sales
declined 5.2% in January, to a seasonally adjusted annual rate.
That rate was down from the level of 6.37 million units a month
earlier the third highest pace on record. January’s sales activity,
however, was 2% above the 5.92 million-unit pace of January 2003.
“We have to keep in mind that the level of home-sales activity over
the last six months has been the strongest on record,” said NAR
chief economist David Lereah. “The January pace was the
sixth-highest ever and is above the total forecast for this year.
We can expect month-to-month ups and downs, but the long-term trend
is for home sales to stay close to record territory this year.” NAR
president Walt McDonald added that continued low interest rates,
strong household formation and an improving economy are expected to
fuel 2004 housing demand.

U.S. residential
remodeling expenditures on owner-occupied properties “will continue
to shine” in 2004 and 2005, as expenditures in that sector increase
by 7.6% and 5.7%, respectively, according to a newly released
forecast by the National Association of Home Builders. The total
remodeling market, despite a sluggish performance in the rental
sector, rose to an estimated $181.9 billion in 2003, up 4.9% over
2002, according to the latest NAHB statistics. The association said
it is bullish over the prospects for continued market growth
through 2012. “Over the next decade, the remodeling market should
enjoy growth that will be better than that seen during the past 10
years,” the Washington, DC-based trade association observed.
Kitchen remodeling, bathroom remodeling and room additions continue
to head the list of the most popular remodeling jobs being
undertaken, the NAHB added.

Domestic shipments of
major home appliances increased slightly in January compared to
January of last year, the Association of Home Appliance
Manufacturers reported. The Washington, DC-based association said
that January appliance shipments totaled 4.96 million units, up
2.8% from the number shipped in January of 2003. Cooking appliance
shipments rose 12.9%, while shipments of kitchen cleanup products
gained 1.9%, and shipments of food preservation products increased
1.1%, according to AHAM.

Index Favorable, With ’04 Fully Underway

The kitchen and bath industry seemingly remains on solid ground,
with year-to-date 2004 indicators comparing favorably to the
indicators of a year ago.

The “Kitchen & Bath Industry Performance Index” an exclusive
quarterly gauge of business activity developed by K&BDN reached
a respectable 90.58 this month, up some 20% from the same time a
year ago.

The Index which was set at a benchmark level of 100 when it was
developed in January of 2003 has ranged from a low of 75.1 in April
of 2003 to a high of 124.6 in September of ’03.

Fluctuations in the Index, which is based on dealer surveys and
the latest available economic data, are aimed at providing a
snapshot of the relative vitality of the kitchen and bath

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

  • Surveyed kitchen and bath retailers reported that sales were up
    some 39%, to an average of 13, over reported sales a month earlier.
    Prospects were reported up by 32%, to an average of 34 for the
  • The average reported price of a kitchen sale for the month was
    $34,100, up an average of 7.9% from the previous month. The average
    reported price of a remodeled bath was $11,800, virtually
    indentical with the previous month’s average. The average number of
    weeks between the time a job is booked and the work actually begins
    was reported at nine weeks for kitchens and eight weeks for
  • The Conference Board’s Consumer Confidence Index weakened
    significantly from a month earlier, as a result of continued
    concerns among Americans about a poor employment market.
  • Housing starts for January dipped 15.7% from December 2003
    levels, according to Census Dept. reports.

However, that projected to a seasonally-adjusted annualized rate
of 1.903 million housing units, up 4.1% over the pace for January,
2003. Single-family starts reached a seasonally-adjusted annualized
rate of 1.537 million units in January, up 1.9% over the same month
last year, while multi-family units were started at a 339,000-unit
pace, up 21.9% over the rate for January, 2003 (see related
Barometers, Page 8).

  • Sales of existing single-family homes were down in January from
    near-record highs but remain strong, according to the National
    Association of Realtors.
  • About 84,000 new homes were sold in January, according to the
    Census Bureau. That was up 10.5% from December sales levels, and up
    20% over January, 2003.
  • January kitchen appliance shipments were up 7.1% over the same
    month in 2003, according to the Association of Home Appliance
    Manufacturers, with shipment totals reaching some 3.35 million
  • The average contract interest rate for 30-year fixed-rate
    mortgages remained at 5.41% as of press time, according to the
    Mortgage Bankers Association. The average contract interest rate
    for 15-year fixed-rate mortgages fell to 4.69%. At the same time,
    the refinance share of mortgage activity rose to 56.4% of total
  • Sales for the nation’s two largest home center chains increased
    over the same period last year. Quarterly sales for Home Depot were
    up 14.5%, to $15.13 billion, in the period ended February 1, while
    sales at Lowe’s jumped 20.1% in the fiscal quarter ending January
    30, to $7.25 billion, with sales for the chain’s fiscal year up
    18.1% to nearly $30.84 billion.

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