Rising construction costs, coupled with elevated mortgage rates and supply chain disruptions, continue to act as a major drag on the market for both new construction and residential remodeling, according to analysts, a growing number of whom now say that the housing market is in a recession. 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
A sharp decline in single-family home construction is the latest indicator that the housing slowdown “is showing no signs of abating,” the National Association of Home Builders said last month. According to the NAHB, single-family housing starts are currently pacing at their lowest reading since June 2020, while new-home sales have fallen to their lowest level since January 2016 and housing affordability fell to its lowest point since the Great Recession. “The decline in single-family starts is reflected in builder surveys, as housing demand continues to weaken on higher interest rates, while builders continue to grapple with higher construction costs,” said Jerry Konter, chairman of the Washington, DC-based NAHB. “A housing recession is underway,” observed NAHB Chief Economist Robert Dietz, noting that the total volume of single-family starts will post a decline in 2022, the first decrease since 2011.
The nation’s housing market is witnessing “a housing recession” in terms of declining home sales, as existing-home inventory remains tight and prices continue to rise, the National Association of Realtors said last month. Total
existing-home sales slipped to a seasonally adjusted annual rate of 4.81 million units, down 20% from the same time in 2021, according to the latest figures, while the median existing-home price has risen for 125 consecutive months, the longest-running streak on record, the NAR said (see related graph, above). “In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” said Lawrence Yun, chief economist for the Washington, DC-based NAR. “Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.” In June, housing affordability plummeted to its lowest level since 1989, although annual price appreciation should moderate by the end of this year and into 2023,” Yun observed. “With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year,” he said.
U.S. homeowners gained a record-breaking $1.2 trillion in “tappable home equity,” resulting largely from the impact of COVID-19, according to Strong Home Mortgage LLC, a consumer-direct mortgage lender. Tappable equity is the borrowing limit that’s determined from the net of a home’s market value and its mortgage balance. It allows homeowners to tap an existing pool of equity and convert it to cash. According to Strong Home Mortgage, the current average level of $207,000 in median tappable equity “is good news” for U.S. households. “Homeowners view tappable equity as an efficient means to boost renovation budgets and increase home values,” said Strong Home Mortgage President Mike Peoples, who predicted “exponential growth ahead for home-equity solutions.”
CABINET & VANITY SALES
Sales of kitchen cabinets and bathroom vanities continued their 2022 upward climb in July, although the pace of growth may be slowing as a reflection of a softening market, the Kitchen Cabinet Manufacturers Association stated last month. According to the KCMA’s latest monthly “Trend of Business Survey,” participating manufacturers reported an increase of 19.7% in overall cabinet and vanity sales in July compared to July of 2021. Custom cabinet/vanity sales rose 15.6% over the same month the previous year, while sales of semi-custom units gained 28.3% and stock cabinet sales were up 14.8%, the Reston, VA-based KCMA said, adding that year-to-date sales (+15.6%) “remain strong” through the first seven months of 2022 compared to January-July of 2021. Cabinet and vanity sales were down 12.5% in July compared to the previous month, however, the KCMA reported.
Homeowners ‘Deeply Concerned’ Over Costs, Survey Finds
AUSTIN, TX — Homeowners are exhibiting signs of “significant stress and deep concerns” over the rising costs of products, raw materials and services tied to home improvement projects, a major new survey has found.
According to the findings of the 2022 Homeowner Sentiment Report, a survey of more than 23,000 homeowners considering home improvement projects, 86% of surveyed homeowners reported that stressors such as surging prices, a potential recession, supply chain backlogs and political unrest are impacting their home improvement decisions.
The annual survey was conducted recently by Modernize Home Services, an Austin, TX-based provider of marketing services for home improvement contractors in 15 segments, including bathrooms and kitchens.
According to Modernize, 61% of surveyed homeowners indicated that their levels of stress about decisions relating to their home were either “more than I can handle” or “a lot of stress; it’s tough to manage.” Some 57% of the homeowners polled believe that the current level of stress is “somewhat worse” to “much worse” than at the start of the COVID-19 pandemic in 2020.
Almost 70% of the homeowners polled said the greatest barrier to their home improvement projects is the “high cost of supplies,” Modernize said. 32% of surveyed homeowners have had to cancel or delay a project in 2022, down from 45% last year, the company added.