Markets Exhibit Signs of Slowing

by WOHe

Markets Exhibit Signs of Slowing

Markets Exhibit Signs of Slowing
The housing and kitchen/bath markets, thus far largely immune to
the economic downturn facing the overall U.S. economy, began to
exhibit their first signs of weakness in recent weeks. It is still
not clear, however, if the existing business climate will grow
weaker before a predicted strengthening by year-end. Among the key
statistics released by government agencies and industry-related
trade associations in recent weeks were the following:

Appliance Shipments
Domestic shipments of major home appliances dipped again in April,
falling further behind last year’s record pace, the Association of
Home Appliance Manufacturers reported. According to the Washington,
DC-based AHAM, appliance shipments fell 2.6% in April, while
year-to-date appliance shipments for the first four months of 2001
were 8.1% below the total posted for January through April of 2000.
Declines were recorded in April in shipments of all appliance
categories, except for cooking products, which rose 1.7%, AHAM

Home Sales
Sales of new single-family homes plunged 9.5% in April, far more
than expected and the largest single-month decline since April of
1997, the Commerce Dept. reported. However, the annual rate of
894,000 units was still higher than the rate of new-home sales in
the same month last year, and the April results came on the heels
of several previous months of exceptionally strong sales, analysts
pointed out. New-home sales in the first quarter of 2001, in fact,
were up 7.4% over those of the first three months of last year,
while sales of new homes in March achieved a seasonally-adjusted
annualized rate of 1.02 million units, surpassing the previous
monthly high of 1 million, set in December 2001, according to the
Commerce Dept.

Housing Starts
The “long-enjoyed” wave of economic expansion is now slowing in
some key U.S. regions, with the slowdown particularly affecting
housing markets in the Midwest and Southeast, according to two
leading economists. Regional forecasters Stanley Duobinis of NAHB
and Steven Cochrane of observed that the Midwest and
Southeast are being impacted more than other areas because those
regions are where durable goods manufacturers are concentrated and
jobless claims have increased the most in recent months. Weakness
also seems to be shifting to California and bordering states, as
the high-tech industry slows and business confidence falters, the
two economists agreed, noting that despite the weakness, however,
the West remains the leading region in terms of overall job growth
in the past year. “Despite all the media headlines, California is
still in good shape because it’s still in recovery mode” after the
last economic downturn, said Duobinis. The strongest housing
markets in recent years were located in warm weather climates where
high-tech industries flourished, or in areas where people own
second homes, Duobinis said. Those markets included Nevada, Idaho,
Colorado, Arizona, California, Florida, Hawaii, Texas, Maine,
Virginia and the District of Columbia.

Market Analysis
Slower Growth, But No Recession, Foreseen

Washington, DC Despite weakening job markets and faltering
consumer confidence brought about by lower corporate profits and
layoffs, the U.S. economy is unlikely to spin into recession in the
coming year.

That was the consensus of several leading economists who
examined the housing market in late-April at the National
Association of Home Builders’ 63rd Semiannual Construction Forecast
Conference here.

The economists, in general, expressed guarded optimism that the
nation will avoid a recession in the coming months, thanks in past
to the prevailing strength of the housing market.

The long-resilient housing market “is holding up quite well,”
said NAHB chief economist David Seiders, even though negative risk
factors have increased in recent months.
“This market is one of the few bright spots in the economy,”
Seiders said, pointing to relatively low long-term interest rates
as a major factor in housing’s resiliency. He noted, however, that
with further declines in consumer confidence, plus rising
unemployment, “it’s almost inconceivable that housing numbers will
be rising.”

The Washington, DC-based NAHB has forecast modest declines for
housing in 2001, and is predicting that housing starts will reach
1.56 million units this year, down 2.6% from last year one of the
best years in history for housing production. Housing starts are
expected to rise 1% next year, to 1.58 million units.

The association also pointed out that some of the greatest
strength in the housing market this year has been in the
multi-family sector, although single-family housing starts for both
2001 and 2002 are expected to be flat.

Housing, along with consumer spending are “hanging in there,”
and have “fared relatively well because of the nature of the
slowdown,” said economist Joel Prakken. He attributed the weakening
economy primarily to “a drop in fixed-investment spending, which is
putting downward pressure on mortgage interest rates” and thereby
spurring home sales.

“Housing continues to be a bright spot in the U.S. economy, and
probably a major reason why the economy isn’t in a recession
today,” said Dept of Agriculture economist Al Schuler.

Nevertheless, “we’re in an extremely vulnerable period,” said
Aubrey Lanston & Co. chief economist David Jones. “We’ll
probably avoid a [textbook] recession, but the low growth rates
will make it feel like one.”

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