The housing, remodeling and related kitchen/bath market continues to muddle along, amid hopeful signs that improvement lies ahead, even despite still-gloomy numbers. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

HOUSING STARTS

The latest housing numbers are reinforcing analysts’ forecasts for “some glimmers of improvement” in the market for single-family homes, the top economist for the National Association of Home Builders said last month. According to David Crowe, chief economist for the Washington, DC-based NAHB, increases in housing starts and permits in June, coupled with the latest builder surveys, suggest that there is some improvement for housing. “Many builders remain very cautious, however, in the face of the severe tightening of credit for acquisition, development and construction financing and increased instances of low appraisals tied to improper use of distressed properties as comps, both of which threaten to derail a housing and economic recovery going forward,” Crowe said. Single-family housing starts rose for a fourth consecutive month in June, posting a 14.4% gain, to a seasonally adjusted annual rate of 470,000 units, while single-family permits rose for a third consecutive month, posting a 5.9% gain to 430,000 units. In the meantime, builder confidence in the market for newly built, single-family homes notched up two points in July to its highest level since September 2008, according to the NAHB.

EXISTING-HOME SALES

The National Association of Realtors is expressing hope that recent gains in existing-home sales are a sign of recovery in the nation’s housing market. Resales rose for the third consecutive month in June – gaining 3.6% to a seasonally adjusted annual rate of 4.9 million units – with inventory easing and home prices declining less sharply than in recent months, the Washington, DC-based NAR reported. “The [June] increase occurred in all major regions of the country,” commented NAR chief economist Lawrence Yun. He added that the NAR expects a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions. Total housing inventory at the end of June fell to 3.82 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, down from a 9.8-month supply in May. “This is another hopeful sign – if we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” Yun said.

CABINET & VANITY SALES

Sales of kitchen cabinets and bathroom vanities fell sharply again in June compared to 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 overall cabinet sales declined 29.3% in June, compared to sales in June of 2008. Sales of stock cabinets dropped 30.5%, while semi-custom sales declined 26.7% and custom cabinet sales fell 39.9%, the KCMA reported. Year-to-date sales through the first six months of 2009 were down 32.3% compared to the January-June period of 2008, the KCMA further noted.

Market Analysis

Bottom for Residential Remodeling May be Near, Harvard Index Suggests

Cambridge, MA — Owner spending on home improvements will continue to trend down through the balance of this year and into the first part of 2010, although signs point to renewed strength in the market, a newly released index suggests.

According to the Leading Indicator of Remodeling Activity (LIRA), released last month by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, some signs “suggest the depressed remodeling market is close to a cyclical bottom,” although annual declines should hover about 11% for the next several quarters (see related graph, right).

“Homeowners are still hesitant to undertake major remodeling projects,” said Nicolas Retsinas, director of the Joint Center for Housing Studies. “While the pace of decline is moderating, increased remodeling activity will not materialize until further signs of recovery emerge in the broader housing market.”

Although the overall outlook going into 2010 is “still bleak,” several components of the LIRA “point to renewed strength in the industry,” said Kermit Baker, director of the Joint Center’s Remodeling Futures Program. “There are some positive developments for the remodeling industry, such as low financing costs for home improvement projects and rising home sales in a growing number of markets,” Baker said. “Weak home prices and decreased cost recovery for most types of remodeling projects, however, discourage owners from pursuing typical upper-end improvements.”

The LIRA is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry.