Slowdown Seen As Only Modest

by WOHe

Slowdown Seen As Only Modest

With half the year already in the bank, 2000 is shaping up as
another good year for major kitchen/bath and housing-related
indicators even though the long-projected slowdown is now
apparently underway, the latest government and industry statistics

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

Existing-Home Sales
The pace of existing single-family home sales “has been
relentless,” even in the face of increases that have seen mortgage
rates rise to levels that are about 1.5% higher than a year ago,
the National Association of Realtors said last month. According to
the Washington, DC-based NAR, the latest figures for resales
reflect an annualized level in 2000 that would make the year the
third-best year ever for existing single-family homes.
Existing-home sales were down 9.8% in the first quarter of 2000,
compared to the record-setting pace of a year ago. Despite the
decline, and recent interest rate increases, home sales “continue
to be brisk,” said the NAR, adding that it expects “a busy summer
for the housing sector” thanks to “steady consumer demand.”

Appliance Shipments
Domestic shipments of major home appliances fell for the first time
in months during April, slipping 5% below the figure posted in
April of 1999, the Association of Home Appliance Manufacturers
reported. According to the Chicago-based AHAM, some 5.089 million
appliances were shipped in April, down from the 5.356 million units
shipped in the same month a year earlier. Despite the decline,
however, year-to-date shipments through April were running 9.5%
over the same four-month period in ’99, AHAM said.

Cabinet & Vanity Sales
Sales of kitchen cabinets and bathroom vanities rose 4.3% in April
over the same month in 1999, the Kitchen Cabinet Manufacturers
Association reported. The Reston, VA-based KCMA said that
manufacturers participating in the association’s monthly “Trend of
Business” survey also reported that sales were up 9% in the first
four months of 2000 compared to the same January-April period last

Home Prices
The price of new homes continue to rise in part, due to the
continued strength of the housing market and, in part, due to a
continued increase in the level of amenities in new homes, the
National Association of Home Builders reported last month. the
Washington, D.C.-based NAHB noted that the average sales price of
new homes rose 6% between the first quarters of 1999 and 2000,
although the “quality-adjusted” index of new-home prices rose only
2% in the same period.

Interest Rate Hikes Seen Cooling Housing

Washington, DC With the cost of borrowing expected to rise as
interest rates increase, housing production will gradually slow to
about 1.6 million units this year down from the “exceptionally
strong” 1.68 million homes that were started in 1999, the National
Association of Home Builders predicted.
Housing analysts at the recent 60th Semiannual Construction
Forecast Conference here said that a healthy, sustainable growth
rate for the U.S. economy would be in the 3.5%-4% range this year
well behind the 7.3% rate of GDP growth in last year’s final
quarter and the 5.4% rate at which the economy expanded in the
first quarter of 2000.

“The Fed cannot be beaten,” said NAHB chief economist David
Seiders, adding that the Federal Reserve will likely implement
several additional interest rate hikes by this fall, increasing
rates on long-term, fixed-rate mortgages to 8.75% and “making it
more difficult for buyers at the low end of the market to qualify
for a loan.”

Those expected interest rate hikes, Seiders said, will likely
slow housing production both this year and in 2001, when housing
starts should decline to about 1.5 million units.

“But those are still big numbers,” Seiders said of housing
projections for 2000 and 2001.

According to Joseph Hu, director of research for Standard &
Poor’s, increases in home equity financing could have serious
repercussions for the economy as the Fed continues to push up
interest rates.

Hu noted that 68% of today’s homeowners have at least some
house-related debt 28% higher than just 10 years ago while the
greatest portion of those borrowers (43%) are using the money to
make home improvements. In contrast, 21% are using the money for
debt consolidation, 8% for investment, 6% for education, and 5% for
vehicle purchases and maintenance.

As the Federal Reserve tightens its grip on monetary policy,
both housing activity and equity financing will eventually decline,
Hu noted, warning that “this could have more impact than the Fed
intends because the amount of money involved in equity financing is

However, despite the projected slowdown in housing production
this year and next, nearly as many homes will need to be built in
the current decade as were built in the 1990s about 16.5 million
said Eric Belsky of Harvard’s Joint Center for Housing Studies.

Looking at regional markets, analysts at the conference noted
that strong economic conditions exist across the country, but they
added that the strongest housing markets are in the Mountain and
Southeast regions, as a result of fast job growth.

This year, as a national housing slowdown begins, all states
will likely see declines in home construction, with the largest
declines occurring in areas where job growth is limited by labor
constraints, analysts concurred. The smallest declines in housing
starts will be seen in the “late recovering” states, including
those in the Northeast, upper Midwest and West, analysts added.

Shipments of Plumbing Fixtures Increase in

Washington, DC Unit shipments of plumbing fixtures rose in 1999
over 1998, the latest U.S. government statistics reveal.

According to figures released recently by the Census Bureau,
some 28.4 million fixtures were shipped during 1999, up 3.5% over a
year earlier. The shipments had a total value of $2.65 billion, a
7.7% increase over 1998.

For the year, the toilet category posted the largest percentage
gain, rising 10%, to 7.8 million units, with a value of $402.1

Gains were also recorded in shipments of lavatories (up 5.9% to
1.9 million units, with a value of $443.8 million); whirlpool tubs
(up 2.3% to 557,982 units with a value of $417.1 million), and
bathtubs (up 0.8% to 4.1 million units valued at $217.2

In contrast, the government reported, declines were recorded in
the areas of shower stalls (down 2.2% to 917,086 units valued at
$217.2 million); kitchen sinks (down 2.3% to 5.68 million units
worth $397.4 million); tub surrounds (down 9.4% to 920,982 units
with a value of $76.1 million), and bidets (down 23% to 35,056
units valued at $6.7 million).

Shaky Market Sees Stocks Fall

A generally quiet Wall Street, characterized by low volume,
volatility and interest rate fears, saw stocks associated with the
kitchen and bath market slip once again in May.

The performance of 51 key stocks of building products
manufacturers, distributors, retailers and e-commerce enterprises
as tracked in Kitchen & Bath Design News’ exclusive monthly
Stock Index slid 69.83 points, or 2.60%, to close the trading
period from April 1 to May 1 at 2613.51.

In similar fashion, the Dow Jones Industrial Average fell 159.58
points, or 1.48%, to end the session at 10652.20. Of the 51 stocks
tracked by K&BDN, declining issues outpaced advancers by a 36
to 15 count; eight of the stocks fell to new annual lows, while
only one climbed to a new 52-week high. and American Standard were among the top gainers
for the period; Whirlpool Corp., Black & Decker and Home Depot
were among the biggest losers.

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