Kitchen & Bath Design News

JUL 2018

Kitchen & Bath Design News is the industry's leading business, design and product resource for the kitchen and bath trade.

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A SERIES OF positive fundamentals are expected to bolster both new construction and residential remodeling in the months ahead, according to a consensus of leading hous- ing-market analysts. 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 Home builders "are buoyed by growing con- sumer demand," which – combined with tight housing inventory, employment gains and demographic tailwinds – "should continue to boost demand for newly-built single-family homes," according to the National Association of Home Builders. "With these fundamentals in place, the nation's housing market should improve at a steady, gradual pace in the months ahead," the Washington, DC-based NAHB predicted. RESIDENTIAL REMODELING Bathrooms have overtaken kitchens as the most popular home remodeling project, according to a survey conducted by the National Association of Home Builders. "Small-scale renovations are slowly becoming just as popular as large-scale projects, with bathroom remodeling becoming more common than kitchens," said NAHB Remodelers Chair Joanne Theunissen. In the survey, remodelers reported the most common projects as bathroom remodeling (81%), kitch- en remodeling (78%), whole-house remodeling (49%), room additions (37%) and window/door replacements (30%). EXISTING-HOME SALES Sales of existing homes are "moving sideways, despite the strong, job-creating economy," ac- cording to the National Association of Realtors. The Washington, DC-based NAR said last month that while "healthy economic conditions are creating considerable demand for pur- chasing a home, not all buyers are able to sign contracts because of the lack of choices in in- ventory." Said NAR Chief Economist Lawrence Yun: "Steady price growth and the swift pace of listings coming off the market are proof that more supply is needed to fully satisfy demand." Yun forecasted that 2018 existing-home sales will be 5.61 million units, up from 5.51 million units last year. APPLIANCE SHIPMENTS Domestic shipments of major home appliances were up sharply in April compared to the same month last year, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that April appliance shipments totaled 6.89 million units, up 13% from the 6.09 million units shipped in April, 2017. Year-to-date sales through April were 2.6% higher than sales during the same four-month time period last year, AHAM said. 2018 Revenue Growth Projected for Residential Remodelers CAMBRIDGE, MA — Residential remodeling firms, including those who focus heavily on kitchen and bath renovation, should witness "healthy" revenue growth in 2018, although those gains would b e "significantly higher" if remodelers weren't hamstrung by ongoing labor shortages. That's the view of Kermit Baker, chief economist for the Joint Center for Housing Studies of Harvard University. Baker, who issued his annual Remodeling Industry Update during a recent conference here, reported that home improvement spending has seen "steady mid-single-digit growth" in recent years. Spending is expected to accelerate as 2018 unfolds, gaining 6.6% over 2017 and rising to $414 billion this year, he estimated. Revenue growth for remodeling firms over the next 12 months, Baker observed, should average 15.4% across firms of all sizes (see related graph, above). Much of the expected growth will result from increases in average revenue per project, Baker said, noting that while growth is projected across all regions, it's expected to be highest in "affordable markets." Among other key trends that Baker identified: • Reliance on home-equity lines to fi- nance major remodeling projects – currently at 10% vs. cash at 59% and credit cards at 32% – has been waning as a result of rising interest rates. • Remodeling project costs have risen 20% over the past five years, but return on investment for those projects has stalled. Strong Fundamentals Seen Aiding Market Despite being hampered by a shortage of skilled labor, residential remodelers are anticipating healthy revenue gains in 2018, as reflected in the graph above. While expectations vary by com- pany, the average revenue gain is projected to be 15.4%, according to surveyed companies (see related story, below). Source: Joint Center for Housing Studies, Harvard University PROJECTED REVENUE GROWTH FOR RESIDENTIAL REMODELING FIRMS Projected % Gain in Revenue Over Next 12 Months Among Surveyed Companies 27% 22% 19% 13% 9% 5% 1% Decrease More than 50% 21-30% 31-50% 11-20% Remain the same 6-10% 10 Kitchen & Bath Design News • July 2018 BAROMETERS A LOOK AT KEY STATISTICS & TRENDS SHAPING THE INDUSTRY MARKET ANALYSIS

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