Market Seen Strong In Months Ahead
The nation’s housing, remodeling and kitchen/bath markets are
expected to finish off 2004 on a strong note, as market
fundamentals remain solid and the economy slowly improves. That was
the consensus of analysts in light of new economic data released at
summer’s end. Among the key statistics released by government
agencies, research firms and industry-related trade associations in
recent weeks were the following:
HOUSING STARTS
The nation’s home builders remain confident about the housing
market and expect to maintain a “healthy pace” of housing starts
through the coming months, the National Association of Home
Builders said last month. “Favorable market conditions continue to
bode well for housing,” said Michael Carliner, economist for the
Washington, DC-based NAHB. “Mortgage rates remain extremely
attractive and with house price performance remaining solid and
continued increases in household formations, we expect housing to
remain strong.” The NAHB also reported that declining mortgage
interest rates helped push builder confidence to its highest level
since October of 2003. “With the ongoing favorable financing
climate and solid house-price performance, we have good reason to
expect continued strength in the housing market,” NAHB said.
EXISTING-HOME SALES
The current level of existing single-family home sales is
considerably above the record pace of 2003 and “is a significant
contributor to overall U.S. economic growth,” the chief economist
of the National Association of Realtors said last month. NAR chief
economist David Lereah, referring to the pace of resales as “a real
eye-popper,” said that current and anticipated mortgage rates “will
preserve favorable housing affordability conditions and help to
keep home sales strong in the months ahead.” NAR president Walt
McDonald added, “The fundamental demand from entry-level buyers,
dominated by the second-largest generation in U.S. history the
children of the baby boom will drive home sales over the next 10
years because this generation is entering the prime years in which
people typically buy their first home.” Existing-home sales are
expected to reach a new benchmark this year, up some 3.4% from the
record level achieved in 2003, to 6.31 million units.
RESIDENTIAL REMODELING
Professional remodeling activity remained at a brisk pace in the
second quarter of 2004, although it edged down slightly from
“exceptional” levels recorded at the beginning of the year,
according to data released last month by the National Association
of Home Builders. The NAHB’s latest in a quarterly series of
“Remodeling Market Indexes” (RMI) revealed that “many remodelers
are still busy and backlogged,” said NAHB Remodelors Council
chairman Douglas Sutton, Sr. “A year-to-year comparison shows we
are set to match last year’s very strong activity,” Sutton said.
The market remained steady in terms of minor and major additions
and alterations, the NAHB reported. Kitchens and bathrooms are
among the categories of remodeling work included in that market
component. “With the ongoing favorable interest rates and steady
activity in all regions across the board, we expect the market to
stay strong,” said NAHB chief economist David Seiders.
CABINET & VANITY SALES
Sales of kitchen cabinets and bathroom
vanities increased 16.4% in July over sales the same month a year
earlier, the Kitchen Cabinet Manufacturers Association said last
month. According to the Reston, VA-based KCMA, manufacturers
participating in the association’s monthly “Trend of Business”
survey reported that year-to-date sales for
the first seven months of 2004 were
running 18.5% over sales in January through July of 2003.
Market Analysis
Factors Other Than Mortgage Rates Seen as Keys to High
Levels of Housing Activity
Washington, DC Housing activity in the next 10 years is expected
to hold up to current high levels, though mortgage rates are
unlikely to be the make-or-break factor they used to be, according
to a panel of housing economists.
Speaking at a recent press conference here, the analysts agreed
that projected household growth, replacement requirements and
second home demand will require high levels of housing production
that will not be as susceptible as in the past to minor swings in
mortgage rates.
“With the economy and financial markets now heading into an
expansion that has been pushing up mortgage rates, questions about
how long robust home starts and sales can continue are being asked,
but current levels are not above sustainability, and the housing
industry won’t have to make much of a transition into a stronger
national economy,” said National Association of Home Builders chief
economist David Seiders.
According to Seiders, “it is a safe bet” that the nation’s
housing market will require average production of 1.85 million to
2.17 million new housing units per year in the decade ahead. “Even
the lower end of this range is above the production levels of
recent years,” he noted.
Conventionally built single-family homes will account for about
70% of the housing supply produced in the next 10 years;
multi-family units will have a 20% share of the market and the
remaining 10% will be trailers, Seiders said.
The nation’s rate of homeownership, which now is in the 68%
range, is headed to over 70% by the end of the next 10 years, and
could even hit 71%-72%, National Association of Realtors chief
economist David Lereah predicted, as minority households start
catching up with their non-Hispanic white counterparts.