Signs Evident For ‘Soft Landing’

by WOHe

Signs Evident For ‘Soft Landing’

Housing starts and both new- and existing-home sales, among the
key economic factors affecting the kitchen/bath market, all began
their anticipated minor retreat as the first quarter got underway
pointing toward a solid, but slightly off, year for the
interest-rate-sensitive kitchen and bath industry.

Among the key statistics released by government agencies and
industry-related trade associations in recent weeks were the
following:

Existing-Home Sales
Existing-home sales, dampened by recent rises in mortgage rates,
fell in January, declining 10.7% from their “exceptional” December
1999 pace of 5.14 million units to a seasonally adjusted annual
rate of 4.59 million units, the National Association of Realtors
reported. According to the Washington, DC-based NAR, the sales
slowdown resulted primarily from tight inventories, unfavorable
weather conditions and a series of mortgage-rate hikes “that have
caused the market to settle into a less hectic pace.” On a
year-to-year basis, home resales were reported down 10% from
January 1999. Despite the decline, the NAR said that the housing
market “remains robust.”

Cabinet & Vanity Sales
Sales of kitchen cabinets and bathroom vanities rose once again in
February, increasing 12.3% over sales during the same month in
1999, according to the Kitchen Cabinet Manufacturers Association.
The Reston, VA-based KCMA said that manufacturers participating in
the association’s monthly “Trend of Business” survey reported that
year-to-date sales for the first two months of 2000 show an
increase of 12.5% over January-February of ’99, with stock cabinet
sales up by 12.6% and sales of custom cabinets up by 12.1%.

Appliance Shipments
Domestic shipments of major home appliances continued their
impressive rise in March, gaining 22% over the shipments of March,
1999, the Association of Home Appliance Manufacturers reported.
According to AHAM, year-to-date shipments through March were
running 14.6% over the same three-month period in ’99.

Housing Starts
The effects of higher mortgage rates “are starting to be felt in
the single-family housing market,” the National Association of Home
Builders reported last month. The Washington, DC-based NAHB noted
that while multi-family housing starts have risen in recent months,
single-family production is off as are housing permits, an
indicator of future housing-start activity. Single-family housing
starts in 2000 are being forecast to decline 4.6% from last year’s
robust pace, although the full year is expected to represent
nothing worse than a “soft landing” for housing, the NAHB said.
Housing starts dropped 11.2% in March, the largest monthly decline
in six years.


market pulse/business conditions

With few exceptions, dealers this year have been experiencing a
renaissance of business, and expect the trend to continue for the
remainder of the year. In fact, most of the dealers recently
interviewed by Kitchen & Bath Design News have met or exceeded
their first quarter goals.
Construction has been noted as the primary reason for this success.
The dealers K&BDN spoke to do believe that customers are more
knowledgeable and are aware of the custom products they want in
their new kitchens and baths. 

Following, dealers interviewed by K&BDN associate editor
John Filippelli share their thoughts about current business
conditions:

“The year is going really well. Business conditions are still very
favorable. I think we are seeing growth in the market because
people are moving in from out of state and there is a lot of
construction going on. Mostly there are nuclear families moving,
which doesn’t really cause any unique challenges. People are
looking for larger homes [and larger] kitchens and baths. I think
the year will end up just as strong as last year and I see more
remodeling in the next year or two because of the new
construction.”
Michael Doser
Quality Kitchen and Bath Colorado Springs, CO

“The year is going okay. We are too small to effectively compete
with the big-box businesses in kitchen cabinets. There is another
dealership is Dayton with a much larger showroom.”
Ben Olive
Castle Kitchens Inc.
Miamisburg, OH

“The year is going great. This is a great time for new products to
come out to market, having something trendy and new to offer
clients. Things have been very strong. Most of our leads come
through the Internet [our Web site] or direct mail.”
Reid Sellgren 
New Home Bath & Mirror Woodbury, MN

“The year has been overwhelming so far because the economy is so
good. We deal in a lot of expensive custom homes, houses that range
from $500,000 to $3 million. It’s mostly 30-somethings moving into
Colorado. Since the business conditions are more favorable, we are
getting into a more custom market. The rest of the year will depend
on the interest rates. I see things being very, very good through
June  much better than last year.”
Linda Pfaff 
The Kitchen Showcase Inc. 
Engelwood, CO

“The year is going fantastic. We have been busy all year. There is
a tremendous amount of construction right now because the economy
in our area is very good. Business conditions are still favorable.
I’d say it’s more of the professional family moving into the area.
Everyone is upgrading to a better quality product. We show that to
be true for us. People are more well informed and we are selling
better quality products. I believe overall the industry will slowly
rise and do very well. If the first quarter is any indication, we
will have a very good year.”
Linda Brooks 
Acorn Kitchen & Bath
Pontiac, MI

“The year is going great. It seems to be an extension of last year
it doesn’t get any better than that. The economy is very good.
People are constantly getting additions. A lot of new construction,
new lots it’s just very active. The business conditions are very,
very favorable. I don’t see any immediate slowdown.” 
Jerry Weed, CKD
Kitchen and Bath Studios Inc. 
Chevy Chase, MD

Remodeling Seen Remaining Strong
Franklin, WI A healthy economy, a population increase, an aging
housing stock and a record level of homeownership will result in
2000 being the remodeling industry’s “best year yet,” the president
of the National Association of the Remodeling Industry predicted
last month.
NARI president Ken Skowronski, CR, owner of KS Remodelers here,
said that NARI is forecasting residential remodeling to reach a
record $140 billion in 2000. He pointed to a series of economic and
demographic factors including favorable interest rates, low
unemployment and a rise in household income as key forces
underlying projected growth.

“Household incomes are on the rise, resulting in more
discretionary monies, and homeowners are realizing the value of
investing in their residences,” Skowronski said. Some 25 million
U.S. homeowners undertake at least one home improvement project per
year, NARI said and that should increase with the current high rate
of homeownership (see related graph, Page 9). There are currently
about 120 million housing units in the U.S., representing an
estimated $8 trillion, NARI added.

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