Market Reports Remain Positive

by WOHe

Market Reports Remain Positive


While some signs of weakness are being reported for new housing,
other key statistical indices with relevance to the kitchen and
bath market continue to remain positive just as they were
throughout 1999.
Among the industry’s key statistical-related developments in recent
weeks were the following:

Cabinet & Vanity Sales
1999, as expected, was a year of significant growth for the cabinet
industry, with sales of kitchen cabinets and bathroom vanities
rising 12.2% for the year, according to the Kitchen Cabinet
Manufacturers Association. The Reston, VA-based KCMA said that
manufacturer-members participating in the trade association’s
monthly “Trend of Business Survey” also reported that sales for the
reporting companies surpassed $4 billion, a record. “This is a
remarkable achievement that was helped tremendously by the
record-busting U.S. economy,” said KCMA executive v.p. Dick Titus,
adding that prospects for the future “remain quite positive.”

Appliance Shipments
Domestic shipments of major home appliances, fueled by a strong
economy, consumer confidence and significant replacement demand,
set a record in 1999, with more than 62 million appliances shipped,
the Association of Home Appliance Manufacturers reported last
month. According to the Chicago-based AHAM, 1999 appliance
shipments totaled 62.45 million units, 10.3% over the 56.59 million
units shipped in 1998 and higher than even the most optimistic AHAM
forecasts issued late last year. The substantial gain was reflected
across all appliance product categories, including kitchen cleanup
appliances (+9.9%), cooking equipment (+8.9%), home laundry
appliances (8.0%) and food preservation appliances (6.6%), AHAM
said. The trade association has projected another strong year for
appliance shipments in 2000, although shipments are being forecast
to decline somewhat, to a level just above 60 million units.

Housing Starts
The projected slowdown in U.S. economic growth will take a toll on
job growth and household income in 2000 and coupled with higher
interest rates and a weaker stock market will “weaken housing
demand to some degree,” according to the National Association of
Home Builders. However, the downslide, which began in the third
quarter of 1999, should look “nothing like the recessionary periods
of the early 1980s and early 1990s, the NAHB said. The Washington,
DC-based trade association’s latest forecast calls for housing
starts to dip 7.8% in 2000, with a slight recovery projected for
2001. Even with the decline, however, the level of housing activity
“should remain quite high in 2000-2001, presenting a solid business
environment for builders and producers of building materials,” the
NAHB noted.
 
Existing-Home Sales
2000 will be the third strongest year on record for existing-home
sales, in spite of an expected decline from last year’s
record-setting pace of more than 5 million, the National
Association of Realtors said. The Washington, DC-based NAR reported
that, while 1999 represented the fourth consecutive growth year for
resales, this year will witness a dip as a result of the increase
in mortgage rates and a slowdown in the economy. “While 30-year
fixed rates are likely to remain historically low in 2000, they
will not approach the low level of a year ago,” the NAR observed.
The trade association said it expects rates to return to the mid-7%
range by the second quarter of this year, and steadily rise
throughout 2001.

Regional Shifts Seen as Less Dramatic Now
Washington, DC The once-popular “rolling recession” theory, which
insisted that one or more regions of the country would be in dire
economic straits at any given time, “has been thoroughly debunked”
by the performance of the U.S. housing industry in recent years, a
leading housing expert asserted.
According to David Seiders, chief economist for the National
Association of Home Builders, dramatic region-to-region differences
in the performance of new residential construction are apparently a
thing of the past, with current regional differences “quite subtle
compared with the dramatic episodes” witnessed in the decades of
the 1970s and 1980s.

“This is fundamentally good news for the country,” said Seiders,
noting, however, that the much milder regional shifts make it “more
difficult” for home builders and product manufacturers to pinpoint
future hot markets.
NAHB’s projected 7.8% decline for housing starts in 2000 “does not
involve sharp contractions in many states, but most areas should
sag to some degree,” Seiders said. He added that current forecasts
anticipate “relatively good growth performance in New England, New
Jersey, South Carolina, Florida, California, Nevada and Hawaii with
a few of those areas possibly posting positive growth, even in the
face of a national slowdown.”


Remodeling Gained in ’99, Report States

Cambridge, MA Residential remodeling expenditures by U.S.
homeowners rose 4.5% 
in 1999 over the year before, reflecting “solid although erratic
gains” in the remodeling industry over the course of the year,
according to remodeling experts at Harvard University.
According to Harvard’s Joint Center for Housing Studies, which
tracks remodeling expenditures on a quarterly basis, homeowners
spent $94.7 billion remodeling their homes in 1999, an increase
over the $91.6 billion spent in 1998 (see graph, above).

The Harvard figures do not include expenditures by persons other
than homeowners. If those expenditures are considered, the total
1999 U.S. remodeling market actually approached $160 billion about
$30 billion more than government estimates said Kermit Baker,
director of the Remodeling Future Program of the Joint Center.

Baker said that some 40% to 50% of American homeowners undertake
some form of remodeling activity each year, with about 40% of those
projects oriented toward structural renovation such as additions
and new kitchens.

“The 4.5% increase in 1999 is a bit above the gains we were
seeing earlier in the year,” noted Baker, adding, however, that it
is likely that growth rates will slow a bit during 2000.
“Recent increases in interest rates will continue to produce some
easing in home sales, and the most popular time for home
improvement projects is immediately following the sale of a home,”
Baker explained.
Baker also said that while the do-it-yourself market is large, it
is currently declining in market share, as households move up in
income and age. “There is tremendous growth potential for the
professional side of the industry,” Baker commented.

According to Nicolas Retsinas, director of the Joint Center, the
1999 result is a result of the nation’s “remarkable
prosperity.”

“Given continued strength in home-buying numbers and an
all-time-high homeownership rate, it is no surprise that Americans
spent a record amount on home improvement in 1999,” Retsinas
said.

The Joint Center for Housing Studies uses a formula to estimate
the size of the remodeling market based on four components:
manufacturers’ shipments of floor and wall tile products; retail
sales at building materials and supply stores; sales of existing
single-family homes, and the bank prime loan rate.

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