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It’s here. The inevitable slowdown in the housing market that industry analysts have been predicting for years is finally impacting the country. Housing starts were down in 2006 and a further slowdown is predicted for at least the first quarter of 2007.

So how can this possibly be good news for the kitchen and bath industry? There are several reasons – most prominent among them continued favorable demographics, lifestyle factors that still lead consumers to focus on kitchens and baths, and the residual strength of the nation’s remodeling market.

Whatever the reasons, however, most analysts interviewed by Kitchen & Bath Design News remain largely optimistic.

According to most analysts, the housing slowdown couldn’t have happened at a better time, and the downturn, expected to continue into the early part of 2007, is being characterized as a “correction” – an inevitable slowdown from an unsustainable and unrealistic pace.

In addition, most experts expect the nation’s residential remodeling market to remain strong, as those people who purchased homes during the recent boom continue to invest in upgrading. Likewise, an aging Baby Boomer market with collectively the largest disposable income in history is expected to increasingly look toward upgrading the amenities in their homes so that they can continue to live in them comfortably for years to come (see related story, below). Finally, other positive factors such as still-favorable interest rates, job growth, gains in household income, high homeownership rates, an aging housing stock and a growing economy suggest cause for optimism, even amidst talk of a slowdown.

All of which is good news to kitchen and bath dealers and designers, who expect business to stay strong for the coming year (see related story, "New Study Shows Vast Majority of Older Americans Want to Remain in Current Homes".) despite the decline in housing starts. While some dealers and designers are planning to shift their focus toward remodeling to offset a slowdown in new-home jobs, others expect to spend 2007 catching up on spillover jobs from the influx of the past few years.

HOUSING DECLINE

From an economist’s perspective, the biggest change in 2007 relates to the drop-off in housing starts and both new- and existing-home sales (see Graphs 2, 3 and 4).

“From the high of the market, which was the first quarter of 2006, to the bottom of the market, we’re probably going to have a 20-25% decline in housing starts,” predicts Kermit Baker, director of the Remodeling Futures Program for The Joint Center for Housing Studies at Harvard University. “That’s significant and certainly beyond the standard definition of a ‘soft landing.’ But,” he adds, “it isn’t a full-blown recession like we saw in the early ’80s and ’90s.”

“I’d characterize 2007 as a rebuilding year,” comments Ken Fears, manager for regional economics at the National Association of Realtors (NAR). “At roughly another 8.7% decline for 2007, we’ve got a little bit further to go in terms of a correction in new-homes sales, but we’re expecting the markets to hit a strong plateau toward the end of this spring.”