Market Headwinds Seen Stunting Growth
Supply-side challenges, along with rising prices, labor shortages and limited inventory, continue to restrain growth in new construction, home sales and residential remodeling, even as all three sectors continue to expand, market analysts report. 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
Soaring building material costs, high demand and low inventory have added tens of thousands of dollars to the price of a new home, causing housing affordability to fall to its lowest level in nearly a decade, the National Association of Home Builders said last month. In the meantime, higher construction costs coupled with supply chain challenges, labor shortages and rising home prices have pushed builder confidence to its lowest level since July 2020, the Washington, DC-based NAHB reported. “While the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building, and even put a hold on some new-home sales,” said NAHB Chief Economist Robert Dietz. “While supply-side limitations are holding back the market, our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions,” Dietz said.
Rising mortgage rates “will soften demand and cool price appreciation” on homes for sale by the end of this year, the chief economist for the National Association of Realtors said last month. According to the latest forecast by Lawrence Yun of the Washington, DC-based NAR, with buyer demand easing and housing starts improving to 1.65 million units in 2022 (compared to an estimated 1.565 million units this year), existing-home sales prices should increase at a far slower pace next year – 4.4% compared this year’s 14.1%. “Home price gains and the accompanying housing wealth accumulation have been spectacular over the past year, but are unlikely to be repeated in 2022,” Yun said. “The housing market looks to move from ‘super-hot’ to ‘warm,’ with markedly slower price gains.”
More than three quarters of businesses in the construction and architectural/design services sectors reported that product and material shortages and costs impacted their businesses in the second quarter of this year, while more than half of both sectors report that labor shortages and costs impacted their businesses, according to Houzz, Inc., the online platform for home remodeling and design. According to Houzz, more than nine in 10 businesses across both sectors reported second-quarter increases in costs for lumber, copper, steel and aluminum. Additional materials that construction pros anticipate increasing in cost include plastic, concrete, paint, foam and drywall, Houzz said, adding that more than nine in 10 construction businesses report moderate-to-severe skilled labor shortages, with carpenters, laborers, framers, cabinet specialists and plumbers in particularly short supply.
CABINET & VANITY SALES
Major domestic kitchen cabinet and vanity manufacturers continued to post substantial sales gains through the first seven months of 2021, according to the latest in a series of monthly surveys by the Kitchen Cabinet Manufacturers Association. The KCMA’s latest “Trend of Business Survey” reflected a year-to-date sales increase of 18.3% through July, compared to the same seven-month period in 2020. Custom cabinet sales through the first seven months were reported up 21.5% over the same period last year, while semi-custom sales rose 17.6% and sales of stock cabinets gained 18.1%, the Reston, VA-based KCMA said. July sales were up 7.2% compared to the same month last year, the association added.