Market Remains Torrid Through Heat of Summer

by WOHe

Market Remains Torrid Through Heat of

The housing and related kitchen/bath markets, fueled by continued
strong demand and low interest rates, continued on their torrid
growth pace as summer got underway in earnest, according to the
latest industry barometers. Among the key statistics released by
government agencies and industry-related trade associations in
recent weeks were the following:

With market demand remaining strong, and mortgage rates hovering
near historic lows, the number of new and existing homes sold in
2002 is expected to set an annual record, the National Association
of Realtors forecast last month. According to the latest annual
projections from the Washington, DC-based NAR, existing-home sales
in 2002, performing at “an incredible pace” through mid-year, are
expected to reach 5.493 million units, up from the record 5.296
million units sold last year. At the same time, new single-family
home sales are expected to reach 915,000 units, up from the
909,000-unit level posted in 2001 (see graph, above right). “The
housing markets continue to defy all odds by posting record-setting
numbers, while the rest of the U.S. economy continues to mire in
sluggishness,” said NAR chief economist David Lereah, pointing to
low mortgage rates as the primary reason for the housing market’s
strength. The trade association noted, however, that since mortgage
rates have likely bottomed out, rising rates and a potential
deceleration in consumer spending could “rein in housing demand” as
2002 winds down. On the flip side, Lereah also noted that the slow,
sluggish economic recovery currently taking shape could actually
assist the housing market even further, by creating “a favorable
interest rate backdrop” for healthy housing activity. “Again, the
housing sector [could become] the awkward beneficiary [due to
favorable interest rates] from the weakness of others,” Lereah

Domestic shipments of major home appliances gained 5.9% in June
over the same month in 2001, remaining on pace to exceed the
all-time record for annual shipments, the Association of Home
Appliance Manufacturers said last month. The Washington, DC-based
AHAM reported that 7.2 million appliances were shipped in June, up
from the 6.8 million units shipped in June of last year.
Year-to-date shipments through June totaling some 35.5 million
units were running 7.1% higher than shipments through the first six
months of 2001, AHAM noted. June appliance shipments increased in
all major categories, including kitchen cleanup (+9.3%), food
preservation (+4.2%), and cooking (+1.7%), the trade association

Sales of kitchen cabinets and bathroom vanities, mirroring growth
throughout the industry, increased in June, 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 June cabinet sales
rose 10.8% over sales in June of 2001. Year-to-date sales from
January through June were up 11.4% over the same six-month period a
year earlier, the KCMA added.

Market Analysis

Weakness in Stocks Seen Eventually Dampening Housing

Washington, DC The stock market, still undergoing extreme and
unsettling ups and downs as of late July, may eventually prove to
be a drag on housing if the current volatile pattern continues, the
National Association of Home Builders predicted.

The Washington, DC-based NAHB said last month that recent
problems with the stock market are “not likely” to have a positive
effect on housing demand, which has remained almost remarkably
resilient through even the worst of the recent economic

“The stock market . . . is both an influence on, and a barometer
of, consumer confidence,” the NAHB observed. “Although some people
see the problems in the stock market as making housing look better
as an investment, the net effect of stock market weakness on
housing demand is not likely to be positive.”

The NAHB pointed to shrinking consumer confidence and fears of
shrinking personal wealth wrought by steady stock market losses
over the last 2+ years.

The trade association added that its most recent nationwide
survey of home builders generally did not pinpoint stock market
weakness as a factor affecting demand or sales expectations for new

“But, where the local economy depends on troubled corporations
such as Worldcom, the possibility of job losses has been a factor,”
the NAHB noted.

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