Rising interest rates, inflationary pressures, labor shortages and building materials bottlenecks continue to put a damper on the nation’s housing and remodeling markets, as 2023 begins amidst forecasts for slower growth. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations were the following:
HOUSING STARTS & NEW-HOME SALES
In a sign that rising interest rates, building material bottlenecks and elevated home prices continue to weaken the housing market, traffic of prospective buyers fell at the tail end of 2022 to its lowest level since 2012 (excluding the two-month period at the beginning of the COVID-19 pandemic), the National Association of Home Builders reported. According to the NAHB, housing affordability fell in 2022 to its lowest level since the association began tracking it in 2012, “as rising mortgage rates, ongoing building material supply chain disruptions, high inflation and elevated home prices pushed the housing market into a recession.” 2022 was also the first year since 2011 to see an annual decline in single-family housing starts, while new-home sales were down roughly 14%. “And given expectations for ongoing elevated interest rates, 2023 is forecasted to see additional single-family building declines as the housing contraction continues,” said NAHB Chief Economist Robert Dietz.
Persistent inflation “has proven quite harmful” to the nation’s housing sector, which “continues to undergo an adjustment due to the continuous rise in interest rates,” the chief economist for the National Association of Realtors said late last year. According to Lawrence Yun of the Washington, DC-based NAR, existing-home sales – pacing at a seasonally adjusted annual rate of 4.22 million units, according to the latest available numbers – declined year-to-date in all regions of the U.S. and were down some 23% from the previous year.
Most U.S. homeowners are “moving forward with their home improvement projects,” even in the face of economic headwinds, a new survey has found. Conducted by Houzz in October, the survey of nearly 4,000 homeowners found that only 1% of the homeowners polled report having canceled a home improvement project in 2022. In contrast, 37% of respondents said they completed a project in 2022 and 23% said they’re planning to start a home improvement project in the next 12 months (see related story, below). “Renovation activity and planned renovations remain strong among homeowners, despite various industry and economic headwinds,” said Marine Sargsyan, staff economist for Houzz, the Palo Alto, CA-based online platform for home remodeling and design. “For many, conditions like limited choices of available homes and rising interest rates are driving them toward renovations, since the cost of moving into a house that fits their current needs has become so expensive,” Sargsyan noted.
MAJOR APPLIANCE SHIPMENTS
Domestic shipments of major home appliances fell in the third quarter of 2022 compared to the same period a year ago, with year-to-date shipments through September also trailing last year’s figures, the Association of Home Appliance Manufacturers reported. According to the Washington, DC-based AHAM, major appliance shipments totaled 18.1 million units from July through September, down 13% from the 20.8 million units that shipped during the same three-month period in 2021. Third-quarter declines were posted in all key product categories, including cooking (-17.5%), laundry (-17.9%), kitchen cleanup (-7.2%) and food preservation (-3.7%).
Year-to-date shipments for the first nine months (61.8 million units) are off 7.3% from the 66.7 million units shipped from January through October of 2021, AHAM said.
Sharp Decline in Remodeling Gains Forecast for 2023
CAMBRIDGE, MA — Annual gains in improvement and maintenance expenditures to owner-occupied homes are expected to decline sharply by the middle of 2023, according to the Leading Indicator of Remodeling Activity (LIRA) released recently by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
The LIRA projects year-over-year growth in homeowner remodeling and repair spending to shrink from 16.1% in 2022 to 6.5% by the third quarter of 2023.
“Housing and remodeling markets are undoubtedly slowing from the exceptionally high and unsustainable growth rates that followed in the wake of the pandemic-induced recession,” said Carlos Martín, project director of the Remodeling Futures Program at the Cambridge, MA-based Joint Center.
“Spending for home improvements will continue to face headwinds from declining home sales, rising interest rates, and the increasing costs of contractor labor and building materials,” Martin added.
But although remodeling market gains are expected to cool significantly in 2023, homeowners still have record levels of home equity to support the financing of renovations, according to Abbe Will, associate project director of the Remodeling Futures Program.
“Energy-efficiency retrofits incentivized by the Inflation Reduction Act of 2022, as well as disaster repairs and mitigation projects following Hurricane Ian, will further support expansion of the home remodeling market to almost $450 billion in 2023,” Will said (see related graph, above).