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Barometers { A look at key statistics & trends shaping the industry } 8 | Kitchen & Bath Design News | June 2015 T he combination of low interest rates, a growing economy and stability in the job market is expected to yield continued growth both in new housing construction and residential remodeling, industry ana- lysts project. Among the key statistics and forecasts released in recent weeks by government agencies, research frms and industry-related trade as- sociations were the following: HOUSING STARTS The housing industry "continues to make gains at a gradual pace," al- though builders are being careful not to add inventory beyond expected demand, especially as they struggle with increasing costs for lots, labor and materials," analysts for the Na- tional Association of Home Builders said last month. Ofcials from the Washington, DC-based NAHB added that, while there are still price-sensi- tive buyers who remain on the fence, "pent-up demand, low mortgage in- terest rates and a growing economy should keep the housing industry moving forward throughout the rest of the year." EXISTING-HOME SALES The market for existing-home sales "appears to be of to an encourag- ing start this spring," according to the chief economist for the Nation- al Association of Realtors. "After a quiet start to the year, sales activity picked up greatly throughout the country in March," said Lawrence Yun, adding that the combination of low interest rates and the ongoing stability in the job market "is im- proving buyer confdence and fnally releasing some of the sizable pent-up demand that accumulated in recent years." Existing-home sales jumped in March to their highest annual rate in 18 months, while unsold inventory showed needed improvement, accord- ing to the Washington, DC-based NAR. "For sales to build upon their current pace, homeowners will increasingly need to be confdent in their ability to sell their home while having enough time and choices to upgrade or down- size," Yun said. RESIDENTIAL REMODELING The gains in residential remodeling estimated for 2014 and the frst part of 2015 are expected to decelerate, but then gain "a little more traction by the end of the year," according to the latest Leading Indicator of Remod- eling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual spending for home improve- ments will increase 2.9% in 2015. "One of the largest contributors to this dampening of remodeling growth is the sluggish existing home sales ac- tivity last year," said Chris Herbert, managing director of the Joint Center. "Housing turnover typically sparks signifcant improvement spending as new owners customize their recent purchases to ft their needs. And, with sales down last year, remodeling will feel the efects this year." CABINET & VANITY SALES Sales of kitchen cabinets and vanities continued to gain ground in 2015, ris- ing in March over the same month last year, 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 March sales of cabinets and vanities rose 8.2% over March of 2014. Sales of stock cabinets declined 2.0%, while semi-custom cabinet sales increased 16.9% and custom cabinet sales rose 19.4%, the KCMA said. Year-to-date sales through March were up 6.8% compared to the same three-month period last year, the KCMA added. Washington, DC — Nearly a decade since the start of the foreclosure crisis, formerly distressed homeowners with re- stored credit are re-entering the housing market, although damaged credit profles and lender overlays will greatly restrict the overall share of those eligible to buy, according to new research from the National Association of Realtors. The Washington, DC-based NAR reported last month that it analyzed the nearly 9.3 million homeowners who underwent a foreclosure, received a deed-in-lieu of foreclo- sure, or short sold between 2006 and 2014 to estimate the amount of credit-worthy borrowers expected to re-enter the housing market as a return buyer in upcoming years. The fndings, according to the NAR, reveal nearly one million of these former owners have likely already pur- chased a home again, and an additional 1.5 million are likely to become eligible and purchase over the next fve years, representing an additional source of buyer demand for the housing market. However, because of low credit quality, millions more will not be able to re-enter in the coming decade. "While loose lending standards in the mid-2000s led to the rise in subprime buyers who ultimately became distressed owners, falling home prices and rising unem- ployment resulted in a large share of prime borrowers also defaulting or going through a short sale," said NAR Chief Economist Lawrence Yun. "Now fueled by a gradually im- proving economy and the strong rebound in home prices, some of these former distressed owners have returned to the market, and more will likely become eligible in coming years." Yun added that the "deep wounds" inficted on the hous- ing market during the economic downturn "are fnally beginning to heal." Restoration of Credit Seen Boosting Sales Of U.S. Homes MARKET ANALYSIS Positive Signs Point To Continued Growth SHARE OF DISCRETIONARY REMODELING SPENDING BY PROJECT SHARE OF REMODELING SPENDING BY GENERATION With the economy strengthening and housing prices recovering, spending by owners on discretionary home improvements is on the rise. As refected in the graphic above left, discretionary spending on kitchen and bath upgrades contributed 17% of the $192 billion in total homeowner spending in 2013, the latest year for which fgures are available. At the same time, while baby boomers are moving out of the prime home improvement spending years, they are still active in the market, accounting for almost half of all home improvement spending nationally in 2013, as seen in the graphic above right. Source: Joint Center for Housing Studies of Harvard University 9.5% Kitchen Remodels & Additions 15.3% Pre-Baby Boom 21.2% Leading Baby Boom 26.6% Trailing Baby Boom 20.9% Leading Gen-X 13.4% Trailing Gen-X 2.6% Millennial 7.7% Bath Remodels & Additions 13.1% Other-Room Additions & Alterations 15.7% System Upgrades 20.3% Exterior Replacements 13.7% Property Improvements 8.2% Disaster Repairs 11.8% Interior Replacements