Kitchen & Bath Design News

AUG 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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RESIDENTIAL REMODELING and housing continue to post gains through mid-year, with forecasts calling for continued growth as the balance of 2018 unfolds. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations were the following: RESIDENTIAL REMODELING The residential renovation and design industry "continues to build on the robust growth of the past four years, with average revenue growth rates hovering around 10% annually, and exceed- ing expectations for most firms," according to the 2018 "State of the Industry" report issued by Houzz, the Palo Alto, CA-based online platform for home remodeling and design. "With market fundamentals aligned in favor of the home improvement industry, 2018 is set to be anoth- er great year," said Nino Sitchinava, principal economist at Houzz. "That said, businesses are cautious about tightening labor markets that may hamper growth in many regions, and apparent economic uncertainty on a national level (see related graph at right)." The Houzz report provides an outlook for 2018 based on data reported by nearly 3,400 professionals in the Houzz community. Companies across all indus- try sectors anticipate revenue growth in 2018, following positive 2017 results, Houzz reported. HOUSING STARTS Ongoing job creation, positive demographics and tight existing-home inventory should spur more single-family production in the months ahead, although a recent softening of sin- gle-family permits indicates "that builders are concerned over mounting construction costs," according to Robert Dietz, chief economist for the National Association of Home Builders. Single-family and multi-family housing starts are 9.8% and 13.6% higher, respectively, than their levels over the same period last year, according to the Washington, DC-based NAHB. But while housing starts are at their highest level since July of 2007, overall permits, a sign of future housing production, declined 4.6%, to 1.3 million units, according to the latest available numbers. CABINET & VANITY SALES Sales of kitchen cabinets and vanities, led by gains in custom units, rose in May compared to sales in May of 2017, the Kitchen Cabinet Manufacturers Association said last month. According to the Reston, VA-based KCMA, manufacturers participating in the association's "Trend of Business" survey reported that May sales of cabinets and vanities were 1.6% above those of May last year. Sales of stock cabinets gained 0.8%, while semi-custom cabinet sales rose 0.3% and custom cabinet sales were up 8.8%, the KCMA said. Year-to-date sales through May were up 1.1% compared to the same five- month period in 2017, the association added. APPLIANCE SHIPMENTS Domestic shipments of major home appliances declined in May compared to the same month last year, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that May appliance shipments totaled 6.67 million units, down 4.7% from the 7.01 million units shipped in May, 2017. Despite the monthly decline, year- to-date sales through May were 1.1% higher than sales during the same five-month time period last year, AHAM said. Increase in Supply Termed 'Crucial' to Health of Housing WASHINGTON, DC — An increase in housing supply is crucial to the health and sustainability of the housing market, according to speakers at a conference sponsored by the National Association of Realtors. The recent conference, which focused on rapidly rising home prices and tight invento- ries, saw all of its speakers agree "that more new-home construction is necessary to meet rising demand from increasing household for- mation, and curtail the affordability crisis," the Washington, DC-based NAR said. "Young adults of today are forming house- holds at a much lower rate than previous generations, and high housing costs contribute to that," said Len Kiefer, deputy chief economist for Freddie Mac. According to NAR chief economist Lawrence Yun, even-more-rapid home price growth could be triggered if supply and demand continues to become increasingly out of balance. "A best-case scenario is largely dependent on new home construction," Yun said. "An increase in inventory will provide some much-needed release." Ken Simonson, chief economist for Associated General Contractors of America, added that the current labor shortage in homebuilding is also contributing to the lag in new-home construction, despite high demand. Material costs have also contribut- ed to the relatively low rate of construction, Simonson added. Continued Growth Seen as 2018 Unfolds Remodelers report that growing labor shortages throughout the homebuilding sector – primarily among carpenters, bricklayers, masons and drywall installers – are delaying projects, increasing costs for home- owners and having a wide range of effects on their business, as illustrated by the graphic above. Source: National Association of Home Builders' Remodeling Market Index THE IMPACT OF LABOR SHORTAGES ON REMODELERS' BUSINESSES Higher wages/subcontractor bids Higher prices for customers Difficulty completing projects on time Turning down some projects Slowed rate of accepting incoming orders Making some projects unprofitable Seeking labor/subs from wider geography Lost/canceled sales 76% 71% 68% 51% 45% 40% 38% 35% 12 Kitchen & Bath Design News • August 2018 BAROMETERS A LOOK AT KEY STATISTICS & TRENDS SHAPING THE INDUSTRY MARKET ANALYSIS

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