Forecasts Remain Positive Through ’04
Forecasts for housing starts, residential remodeling activity
and shipments of key kitchen/ bath industry-related products remain
highly favorable through mid-year, according to the latest economic
barometers. Among the key statistics released by government
agencies, research firms and industry-related trade associations in
recent weeks were the following:
RESIDENTIAL REMODELING
Residential
remodelers are bullish in their economic outlook for 2004,
according to the National Association of Home Builders, which last
month released the latest results of its Remodeling Market Index
(RMI). According to the Washington, DC-based NAHB, the quarterly
index rose to a record level of 59 in the first quarter of 2004,
“signaling positive impressions of current market conditions, as
well as expectations for the near future” among remodeling
professionals, including kitchen and bath specialists. “When the
RMI moves above 50, it tells you that the industry is very
healthy,” said NAHB Remodelors Council Chairman Douglas Sutton, Sr.
“Not only have we recorded the strongest first-quarter index rating
in four years, but across the country we are also seeing record
numbers of calls for bids and reports of backlogs that will keep us
busy throughout the year.” The RMI is based on a quarterly survey
of 582 professional remodelers, whose answers to a series of
questions were assigned numerical values to calculate both current
and future market conditions. “The current market conditions index
shows a very strong market, compared to the same period last year,”
said NAHB Chief Economist David Seiders (see graph at right).
EXISTING-HOME SALES
Sales of existing single-family homes should moderate as the year
goes on, but should nevertheless approach the record for resales
established in 2003, the National Association of Realtors said last
month. The Washington, DC-based NAR reported that existing-home
sales increased for the third consecutive month in April, to a
seasonally adjusted annual rate of 6.64 million units, and were at
the second-highest pace on record. David Lereah, NAR’s chief
economist, said that strong sales numbers have been anticipated for
both April and May. “Part of what we’re seeing now is
‘fence-jumping’ by people wanting to buy a home before interest
rates move higher,” Lereah said, noting that, even with recent
rises, mortgage interest rates appear to be leveling-out in the
6.3% range. “Although the pace of home sales should be slower in
the second half, total sales in 2004 will be close to last year’s
record,” said NAR President Walt McDonald.
APPLIANCE SHIPMENTS
Domestic shipments of major home appliances are expected to set
records both this year and in 2005, according to the latest
forecast released by the Association of Home Appliance
Manufacturers. The Washington, DC-based trade association said last
month that its latest revised forecast pointed to a total of about
75.3 million appliances being shipped in 2004, up from the record
73.7 million units that were shipped last year. The forecast for
2005 calls for an increase over this year, to 76.9 million units,
AHAM said.
CABINET & VANITY SALES
Sales of kitchen cabinets and bathroom vanities increased 19.1% in
April 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 four months of 2004 were running 18.3% over sales in
January through April of 2003.
K&BDN Index Remains Favorable at
Mid-Year
The kitchen and bath industry, like the rest of the housing
market, apparently continues to remain resilient and on a growth
track, comparing favorably at mid-year to its solid performance in
2003.
The “Kitchen & Bath Industry Performance Index” an exclusive
quarterly gauge of business activity developed by Kitchen &
Bath Design News reached a healthy level of 114.69 last month, up
markedly from its last reading, in April, and up over the level
achieved the same month last year.
The Index which was set at a benchmark level of 100 when it was
developed in January of 2003 has ranged from a low of 75.1 in April
of 2003 to a high of 124.6 in September of ’03.
Fluctuations in the Index, which is based on dealer surveys and
the latest available economic data, are aimed at providing a
snapshot of the relative vitality of the kitchen and bath
market.
Among the weighted components comprising this month’s Index were
the following:
- Although the average number of kitchen and bath prospects seen
by retailers responding to K&BDN’s quarterly survey slipped to
13, the average number of sales booked during the month increased
to 10. The average number of weeks between the time a job was
booked and the work actually begins was six weeks for both kitchens
and baths.
- The Conference Board’s Consumer Confidence Index was somewhat
improved from recent months, with the pickup in the job market
offsetting the impact of high gas prices and continuing tensions
overseas.
- Both housing starts and building permits remained at relatively
high levels, and up over the same time in 2003, indicating that
momentum in the housing industry continued to be as strong as any
time in the recent past.
- Kitchen appliance shipments remained at healthy levels, and
seemed on pace to break the previous annual record, set in
2003.
- Existing-home sales, despite slowly rising interest rates,
remained at a robust, six-million-unit annual pace with
expectations high for a continued favorable performance by resales.
At the same time, sales of new homes were being forecast to total
1.113 million units by year’s end, up some 2% from the record pace
of 2003.
- Sales of kitchen cabinets and bathroom vanities continued their
longstanding track record of month-over-month growth.
- The unemployment rate remained unchanged, amid indications that
more jobs are opening up while fewer are lost.
- Stock prices for firms involved in the kitchen and bath
industry edged up in May, while major home improvement retailers
Home Depot and Lowe’s Companies reported significant gains in
first-quarter sales over the same period a year earlier.
The average contract interest rate for 30-year fixed-rate
mortgage remained in the 6+% range at press time.