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Barometers { A look at key statistics & trends shaping the industry } 8 | Kitchen & Bath Design News July 2014 Housing Uptick Expected, With Demand Riding High H ousing activity, im- pacted early t his y e a r b y s e v e r e weat her, shou ld see a n uptick as 2014 unfolds, al- though the market's upward, post-recession trajectory re- mains uneven and sluggish. Among the key statistics and forecasts released in recent weeks by government agen- cies, research firms and industry-related trade asso- ciations were the following: HOUSING STARTS & NEW-HOME SALES Recent growth in multi-family housing production "is a very positive development, as it shows an expected increase in household formations from young people renting apart- ments and taking the frst step into the housing market," ac- cording to David Crowe, chief economist for the National Association of Home Build- ers. "These young households will form the demand for own- ership in the future," Crowe said. On another positive note, sales of newly built, single- family homes have been on the rise, with "builders add- ing inventory in anticipation of a further release of pent- up demand," Crowe said. "We are only about halfway back to what could be considered a normal market, but relatively low mortgage rates and af- fordable home prices are factors that should help keep starts and sales on a slow up- ward trajectory," he observed. In contrast, while multi-hous- ing production has soared in recent months, single-family starts remain essentially fat, amid builder concerns that tight credit availability and uncertain economic condi- tions are keeping buyers on the sidelines. RESIDENTIAL REMODELING Although "solid growth" is expected in the residential remodeling market this year, momentum should begin to moderate in the fourth quarter, according to the latest "Leading Indicator of Remodeling Activity" (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. Accord- ing to Joint Center analysts, sluggishness in the hous- ing market may result in a deceleration of home im- provement spending from double-digit annual growth through the third quarter of 2013 to a year-over-year gain in the high single digits by the end of this year (see related graph at right). "The housing recovery has at least temporarily lost some of its momentum," said Eric Belsky, managing director of the Cambridge, MA-based Joint Center. "As a result, remodeling spending is expected to follow suit and see slower growth beginning later this year," Belsky added. APPLIANCE SHIPMENTS Domestic shipments of major home appliances increased in April, with year-to-date fgures through the frst four months of this year running slightly ahead of 2013, ac- cording to the Association of Home Appliance Manu- facturers. The Washington, DC-based AHAM reported last month that April ap- pliance shipments totaled 5.37 million units, up 2.9% from the 5.22 million units shipped in April, 2013. Year- to-date shipments through April were running 0.8% above t he tot a l for t he first four months of 2013, AHAM said. CABINET & VANITY SALES Sales of kitchen cabinets and vanities continued their 2014 upward path in April, the Kitchen Cabinet Manu- facturers Association said last month. According to the Reston, VA-based KCMA, manufacturers participating in the association's monthly "Trend of Business" survey reported that April sales of cabinets rose 11.3% over the same month in 2013. Sales of stock cabinets increased 11.9%, while semi-custom cabinet sales rose 11.0% and custom cabinet sales gained 9.9%, the KCMA said. Year- to-date sales through April were up 12.1% over the same four-month period in 2013, the KCMA added. Market Climbs Amid Lingering Sluggishness MARKET ANALYSIS Washington, DC — Hous- ing activity was sub-par in the frst quarter of this year, dampened in part by severe weather, but an uptrend is expected due to "healthy underlying demand" over the balance of the year and through 2015, according to analysts at a recent residen- tial real estate forum here. According to Lawrence Yun, chief economist for the National Association of Real - tors, although existing-home sales rose more than 9% to nearly 5.1 million in 2013, sales activity retrenched during the past six months. Even with gradual improve- ment going forward, sales are projected to decline about 3% in 2014, to about 4.9 million, but should trend up to some 5.2+ million in 2015, Yun said. Because of tight inven- tories and rising sales last year, the median existing- home price rose 11.5% to just over $197,000, t he Washington, DC-based NAR said. Home price growth is likely to moderate from more new home construc- tion, with the median price increasing about 6% in 2014, to $209,000, and reaching nearly $219,000 next year as market conditions begin to balance. And an upside of rising prices is a recovery in home equity, according to Yun. Housing starts have stayed below 1 million a year for the past six years, but need to reach the long-term average of 1.5 million to balance the market, Yun noted. "Because of the prolonged slowdown in construction, we now need 1.7 million housing starts per year to catch up," he observed, add- ing that, while improving, housing construction is es- timated at nearly 1.1 million starts this year, and approxi- mately 1.4 million in 2015. Although solid growth is expected in the residential remodeling market this year, year- over-year gains should begin to moderate from double-digit growth through the third quarter of 2013 to an increase in the high single digits by the end of 2014, as refected in the graph above. The projected deceleration of home improvement spending, analysts contend, is a byproduct of the current sluggishness in the housing market. LEADING INDICATOR OF RESIDENTIAL REMODELING ACTIVITY FOUR-QUARTER MOVING RATE OF CHANGE Source: Joint Center for Housing Studies, Harvard University 2011 1st Qtr.........-1.5% 2nd Qtr. ....... 0.3% 3rd Qtr. ........ 6.3% 4th Qtr. ....... 8.4% 2012 1st Qtr ......... 9.0% 2nd Qtr. ...... 7.4% 3rd Qtr. ........ 6.2% 4th Qtr. ....... 4.2% 2013 1st Qtr.......... 4.5% 2nd Qtr. ....... 4.5% 3rd Qtr. ........ 9.5% 4th Qtr. ...... 11.0% 2014 1st Qtr........ 10.7% 2nd Qtr. ..... 13.1% 3rd Qtr. ..... 14.5% 4th Qtr. ....... 9.4% KBD_8-9_BarCBT.indd 8 6/17/14 8:35 AM