Kitchen & Bath Design News

OCT 2018

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AFFORDABILITY ISSUES, DUE largely to material-cost increases, are dampening the strength of housing and remodeling, even as the market is buoyed by economic growth and favorable demographics, analysts say. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and indus- try-related trade associations were the following: RESIDENTIAL REMODELING Remodelers continue to see solid consumer demand, although rising materials costs are "impeding the market's ability to be even stron- ger," according to National Association of Home Builders' Remodelers Chair Joanne Theunissen. The NAHB's latest Remodeling Market Index (RMI) posted a reading of 58 in the second quarter, up one point from the previous quarter. The RMI, which averages ratings of current ac- tivity with indicators of future activity, has been consistently above 50 since the second quarter of 2013. Any number above 50 reveals that more remodelers report market activity is higher com- pared to the prior quarter than report it is lower. "Improving economic growth is supporting demand," said NAHB Chief Economist Robert Dietz. "However, remodelers have to deal with rising material prices and the continued short- age of labor to keep prices competitive [and slow] the increasing backlog of remodeling jobs." HOUSING STARTS Supply-side challenges, including increases in material prices, are affecting housing affordabili- ty, although consumer demand and builder confi- dence remain solid due to a growing economy, an expanding job market and positive demographics, the National Association of Home Builders said last month. Citing recent gains in both single- and multi-family construction, Robert Dietz, chief economist for the Washington, DC-based NAHB, said that some projects are experiencing construc- tion delays due to cost increases that, coupled with rising interest rates, are putting upward pres- sure on home prices and contributing to grow- ing affordability challenges. While confidence remains solid, builders are increasingly focused on growing affordability concerns, noted NAHB Chairman Randy Noel (see related graph). EXISTING-HOME SALES Continuous price increases "have steadily reduced demand" to a point where existing-home sales are at their slowest pace in more than two years, says the National Association of Realtors. The Washington, DC-based NAR reported last month that existing-home sales – pegged at a seasonally adjusted annual rate of 5.34 million units – are currently 1.5% below a year ago, and have fallen on an annual basis for five straight months. The median existing-home price for all housing types is up 4.5% compared to one year ago, and year- over-year prices have increased for 77 months, the NAR noted. "In addition to the steady climb in home prices, it's evident that the quick run-up in mortgage rates has had a cooling effect on home sales," said NAR Chief Economist Lawrence Yun. APPLIANCE SHIPMENTS Domestic shipments of major home appliances gained ground in July compared to July of 2017, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported that July appliance shipments totaled 5.88 million units, 2.8% over the 5.72 mil- lion units shipped in July, 2017. Year-to-date sales through July were 0.9% below sales during the same time period last year, AHAM added. CABINET & VANITY SALES Sales of kitchen cabinets and vanities advanced in July compared to sales in July 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 July sales of cabinets and vanities were 3.8% above those of July last year, with year-to-date sales through July up 1.5% compared to the same period in 2017. Longtime Challenges Seen Hindering Growth in Housing CAMBRIDGE, MA — The housing market is on "sound footing," although several longtime challenges persist and, by many metrics, the situation has worsened for both the lowest-income Americans and those higher up the income ladder. That's among the findings detailed in the 2018 State of the Nation's Housing report, released by the Cambridge, MA-based Harvard Joint Center for Housing Studies. The annual rep ort found that, despite gains in housing production, household formation and homeownership rates, the number of Americans burdened by housing costs has risen, the number of households with student loan debt has nearly doubled and the gap between black and white homeownership has widened. The Harvard report also points to constraints in the supply of new housing, which is fueling affordability challenges. According to Joint Center analysts, the rela- tive lack of new housing, along with Americans' decreasing propensity to move, limited the number of homes for sale, which dropped to record lows in 2017. As a result, house prices rose 6.2%, and now top their pre-crisis peaks in a majority of major markets. "The new report shows that, if the nation is to make real progress in addressing its housing challenges, there is a need to expand assistance for those beyond the market's reach," said Chris Herbert, managing director of the Joint Center. Cost Hikes Dampening Market Strength Aug. 2017 Jan. 2018 Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Builder confidence in the market for newly built single-family homes, while down slightly according to the latest numbers, remains solid as a result of solid economic growth, an expanding job market, rising household formations and strong consumer demand. However, housing analysts cite growing concerns about affordability, stemming largely from rising interest rates and construction costs. Of particular concern, analysts say, is how tariffs and the growing threat of a trade war are affecting key building material prices, particularly lumber. Source: NAHB/Wells Fargo Seasonally Adjusted Housing Market Index THE CONTINUED STRENGTH IN HOME-BUILDER CONFIDENCE 67 64 68 69 74 72 71 70 68 70 68 68 67 10 Kitchen & Bath Design News • October 2018 BAROMETERS A LOOK AT KEY STATISTICS & TRENDS SHAPING THE INDUSTRY MARKET ANALYSIS

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