Conditions in the nation’s housing market are expected to gradually improve as 2024 unfolds, even as residential remodeling sees a gradual softening in the months ahead, analysts and trade associations are predicating. 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
High mortgage rates continue to hammer builder confidence, although recent economic data suggest that housing conditions may improve in the coming months, the National Association of Home Builders said. Given the lack of existing-home inventory, anticipated lower mortgage rates “will price-in housing demand and likely set the stage for improved builder views of market conditions,” said Robert Dietz, chief economist for the Washington, DC-based NAHB, which reported that rising mortgage rates, elevated construction costs and limited existing inventory helped push housing affordability in the third quarter of 2023 to its lowest level in more than a decade. The NAHB is forecasting approximately a 5% increase for single-family starts in 2024, as financial conditions ease in the coming months. “Rising mortgage rates have been the key cause of declining housing affordability conditions,” said Dietz, noting that the pace of new-home sales was up markedly in 2023, “as many homeowners with attractive mortgage rates are electing to stay put rather than purchase a move-up home.”
Elevated mortgage rates, high home prices and limited housing inventory “are making the dream of homeownership difficult for Americans,” although existing-home sales are projected to rise by 15% in 2024, the chief economist for the National Association of Realtors said. Speaking at a meeting of the Washington, DC-based NAR in Anaheim, CA, Lawrence Yun noted that “high mortgage rates and low inventory dominated” the housing market in 2023, with resales projected to decline by 18%, compounding a 17% reduction in 2022. “Lack of inventory is providing support for high prices, but it’s also making it difficult for first-time buyers to enter the housing market, Yun said, adding that 30-year fixed mortgage rates “have likely crested.” Yun forecasted that interest rates will drop to between 6-7% by the spring, and said he anticipates that more existing-home sellers will enter the resale market this year.
Annual spending for improvements and repairs to owner-occupied homes is expected to decline at a moderate rate throughout 2024, as persistent high interest rates, limited inventory, and homeowner concerns continue to weigh on the residential-remodeling market (see graph, above right). According to the latest Leading Indicator of Remodeling Activity (LIRA), released late last year by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, annual owner expenditures for home updates and maintenance will decline by 7.7% from its third-quarter 2023 level of $489 billion to $452 billion over the coming four quarters. “While the rate of decline should decelerate significantly in the second part of the year, 2024 is shaping up to be a challenging year for home remodeling,” reported Abbe Will, associate project director of the Remodeling Futures Program. ▪
Second-Half 2024 Market Rebound Forecast by NKBA
BETHLEHEM, PA — Despite a third-quarter slowdown 2023 in business, kitchen and bath industry professionals are forecasting a rebound in the second half of 2024, according to the latest in a quarterly series of market indexes released by the National Kitchen & Bath Association.
The NKBA’s Q3 2023 Kitchen & Bath Market Index (KBMI) said that 44% of surveyed kitchen and bath firms, and 49% of manufacturers, expect sales revenue to increase in 2024, with most companies expecting any significant pickup to occur in the second half of the year.
According to the NKBA, most industry professionals were experiencing “difficult market conditions” in the latter part of 2023, “as consumers pull back due to inflation and higher interest rates (leading) to a decrease in project leads and completions, as well as a rise in postponements and cancellations.”
Among other results from the latest KBMI:
Price increases are slowing down, and supply chain challenges have nearly vanished. Year-over-year price increases in Q3 2023 were on par with inflation growth (3.6%), and kitchen/bath firms report that they will increase their prices by only 1.7% through Q1 2024. Along with more stable pricing, supply chain challenges have nearly vanished.
Gross margins are under pressure. This is, in part, due to kitchen and bath professionals “getting hit with further material costs” while sales slow. Retail sales declined by an average 1.3% YOY, even as vendors passed on markups of 8% or more for multiple product categories, including countertops, lighting, cabinets, vanities, refrigerators, hardware, dishwashers and tile, the NKBA said, adding that rising labor costs also challenge margins. About 26% of firms reported lower gross margins compared to a year ago, the association added. ▪