Post-War Housing Market Seen as Solid

by WOHe

Post-War Housing Market Seen as
Solid

Conditions in the housing, remodeling and kitchen/bath markets
improved markedly in the second quarter of 2003, analysts agreed.
Among the key statistics released by government agencies, research
firms and industry-related trade associations in recent weeks were
the following:

RESIDENTIAL REMODELING
Following a lull in residential remodeling at the end of 2002,
professional remodelers reported a busier beginning to 2003 and
significantly improved expectations for the rest of this year,
according to the results of the National Association of Home
Builders’ latest Remodeling Market Index (RMI). The RMI is based on
a quarterly survey of more than 600 professional remodelers, who
assess current, as well as future, market conditions. Noted NAHB
Chief Economist David Seiders, “Current additions, alterations and
maintenance and repair work ordered by homeowners ascended to very
healthy levels at the beginning of this year, and professional
remodelers are quite optimistic that conditions in this sector will
continue to improve.”

HOUSING AFFORDABILITY
Lower mortgage interest rates offset higher home prices and
improved housing affordability conditions in the first quarter of
2003, to their most favorable level in 30 years, the National
Association of Realtors reported last month. The NAR’s Composite
Housing Affordability Index reached 144.0 during the first quarter,
up 3.7% from the 140.3 reported in the fourth quarter of 2002, the
Washington, DC-based association said. The Index was 8.2 points
higher than the same period a year earlier, when it stood at 135.8
(see graph, above right). The index reveals that the nation’s
typical household had 144.0% of the income needed to purchase a
home at the first-quarter median existing-home price of
$161,500.

HOUSING STARTS
The recent increase in new home construction has “provided
reassurance that housing activity will proceed at a healthy level
this year,” said Kent Conine, president of the NAHB. NAHB’s Seiders
said that recent housing figures “provide good news that the
industry remained resilient through major weather gyrations, as
well as uncertainties related to the war in Iraq and a potential
terrorist backlash.” At the same time, the NAHB announced that
new-home sales rebounded sharply in March, and said that builder
confidence in the market for new single-family homes stabilized in
early April. “Signs that the situation in Iraq is under control and
that consumer confidence is reviving are giving builders a sense of
reassurance,” said Conine.

CABINET & VANITY SALES
Sales of kitchen cabinets and bathroom vanities rose 8.6% in March
compared to the same
month a year earlier, 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
year-to-date sales through March were up
9.6% over sales during the same three-month period last year.

APPLIANCE SHIPMENTS
Domestic shipments of major home appliances, recovering from a slow
early-year pace, surged in March, the Association of Home Appliance
Manufacturers reported. According to the Washington, DC-based AHAM,
March appliance shipments rose 10.5% over shipments in March of
2002. Year-to-date shipments for the first three months of 2003
were up 6.6% over that time span last year, AHAM said. The March
gains were posted primarily in laundry and home comfort equipment,
however. While kitchen cleanup appliance shipments rose 2.1%
compared to March 2002, shipments of cooking appliances (-7.3%) and
food preservation products (-2.3%) both declined, AHAM noted.

K&BDN Monthly Index Posts Sharp Gain

After several months of uneven results, the “Kitchen & Bath
Industry Performance Index” bounced back strongly this month,
rising sharply as a result of rising consumer confidence and
broad-based increases in industry-related sales and product
shipments.

The Index an exclusive monthly gauge of business developed by
Kitchen & Bath Design News surged this month to 102.68, its
highest level to date. It started the year at a benchmark level of
100, and had fallen to a low of 75.1 in April.

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 market
(see Editor’s Note).

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

  • Surveyed kitchen and bath retailers reported an average of 18
    prospects and seven sales for the month of March. The number of
    prospects was up 75.8% over the previous month and the number of
    sales up 8.3%.
     
  • Surveyed retailers also reported that the average price of a
    kitchen remodeling job booked during the month was $19,659, and the
    average price of a bathroom remodeling was $7,732. These marks are
    well below the higher numbers reported in February, indicating that
    medium- and low-end buyers were back in the market during
    March.
     
  • March kitchen cabinet sales were up 8.6% over March 2002
    levels, states the latest “Trend of Business” survey from the
    Kitchen Cabinet Manufacturers Association (KCMA).
     
  • Kitchen appliance shipments rose 38.3% in March over February
    levels, to just under 4.43 million units, per the latest figures
    from the Association of Home Appliance Manufacturers (AHAM).
     
  • The Conference Board’s Consumer Confidence Index reversed four
    months of declines and jumped to 81.0 (1985=100), up from 61.4 in
    March. The Expectations Index rose to 84.8 and the Present
    Situation Index improved to 75.3. Those rating present business
    conditions as “bad” declined to 23.7%, while those holding the
    opposite view rose to 16.2%.
     
  • Housing starts climbed 36.0% from the previous month to 149,700
    units in March an 8.3% increase over March, of 2002, according to
    the Census Bureau. For the month, the seasonally adjusted
    annualized rate hit 1.78 million units. Through the first three
    months of the year, some 377,600 homes have been started, a 2.4%
    increase over the same period in 2002.
     
  • One hundred thousand new homes were sold in March, up 19.0%
    over February and up 11.1% over March, 2002, the National
    Association of Home Builders (NAHB) reported. That is a seasonally
    adjusted annualized rate of just over 1.01 million new homes.
     
  • Some 444,000 existing homes were sold in March, according to
    the National Association of Realtors. That was 28.7% ahead of
    February and 2.1% ahead of March, 2002, and translated to a
    seasonally adjusted annualized rate of 5.53 million homes
    sold.
     
  • Fixed-rate mortgages had hit a record low as of press time,
    with the 30-year average reported at 5.27%, according to the
    Mortgage Banker’s Association of America. Mortgage applications
    jumped 14%. Mortgage refinancing continues at high levels,
    accounting for 68.7% of all mortgage activity.
     
  • Stocks associated with the kitchen and bath industry recorded
    strong gains in April

Market Analysis

With Iraq War Over, Analysts Bullish Over Housing
Industry

Washington, DC Housing industry analysts are predicting
significant improvement in market conditions, the National
Association of Home Builders said. Commenting on the results of its
recent semi-annual Construction Forecast Conference here, the
Washington, DC-based NAHB projected sustained improvement beginning
in the year’s second half.
According to the NAHB, housing construction in 2003 will likely
equal or even slightly surpass last year’s 1.7 million units, with
si ngle-family activity remaining especially strong and
multi-family production receding only slightly.

The major reason for its optimism, the NAHB said, is that the
Federal Reserve is “unlikely to increase interest rates until late
in the year, or possibly not until early next year.” As a result,
long-term mortgage rates in 2003 termed “a powerful stimulant to
the housing sector” should be about half a percentage point lower,
on average, than they were in 2002, the trade association said.

Economists also noted that:

  • While conditions for refinancing remain favorable, the current
    refinancing boom should begin to taper off as the year
    progresses.
     
  • The annual rate of house price increases is tapering off in
    most of the country, and should eventually settle in at the 4-5%
    range, down from about double that in the past few years.
     
  • Media speculation about house-price “bubbles” will also fade as
    the economic recovery progresses.

 

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