Kitchen & Bath Design News

DEC 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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PROJECTIONS FOR HOUSING and remodeling market growth remain for the most part bullish, despite a series of ongoing challeng- es, including rising interest rates, construction labor shortages and limited for-sale inventory. Among the key statistics and forecasts released in recent weeks by government agencies, re- search firms and industry-related trade associa- tions were the following: HOUSING STARTS A growing U.S. economy coupled with positive household demographics should keep the housing market moving forward "at a modest pace" in the months ahead, the National Association of Home Builders said last month. The Washington, DC- based NAHB issued its prediction in the wake of a Commerce Dept. finding that new homes were being built at a seasonally adjusted annual rate of 1.2 million units – a rate that the NAHB said was "in line with builder sentiment, which shows that builders are confident in the housing market but continue to face supply-side challenges." Home builders, according to NAHB Chairman Randy Noel, "remain concerned about labor shortages, especially since the number of unfilled construc- tion jobs has reached a post-recession high." EXISTING-HOME SALES Rising interest rates coupled with limited inven- tory and rising prices continue to fuel slippage in existing-home sales across all regions of the U.S., with sales dipping to their lowest level since November 2015, the National Association of Realtors reported last month. "Decade's high mortgage rates are preventing consumers from making quick decisions on home purchases, [while] all the while affordable home listings re- main low, continuing to spur under-performing sales activity across the country," said Lawrence Yun, chief economist for the Washington, DC- based NAR. Sales, according to the latest avail- able figures, are off some 4% from a year ago, although "consistent job gains could allow more Americans to enter the market with a steady and measurable rise in inventory," Yun predicted. RESIDENTIAL REMODELING The nation's residential remodeling market is being impacted by offsetting trends, with a sound economy, low unemployment and easing lumber prices being counterbalanced by rising interest rates and an ongoing construction labor short- age, the National Association of Home Builders said last month. The NAHB's latest Remodeling Market Index (RMI) posted a reading of 58 in the third quarter of 2018, remaining stable from the previous quarter, the trade association reported. The RMI, which measures both current and future remodeling conditions, has been consis- tently above 50 – indicating that more remodelers report market activity is higher compared to the prior quarter than report it is lower – since the second quarter of 2013. "Remodelers are seeing homeowner demand remain strong," said NAHB Remodelers Chair Joanne Theunissen. "Both positive home price growth, albeit at a slightly slower rate, and good consumer confidence are supporting a steady remodeling market." APPLIANCE SHIPMENTS Domestic shipments of major home appliances declined slightly in September compared to the same month a year ago, with year-to-date shipments remaining slightly below those of 2017, according to the Association of Home Appliance Manufacturers. The Washington, DC- based AHAM reported last month that September appliance shipments totaled 7.51 million units, down 0.4% from the 7.54 million units shipped in September, 2017. Year-to-date sales through September were 0.7% below sales during the same nine-month time period last year, AHAM said. Remodeling Growth Rate Seen Slowing, Even as Market Expands CAMBRIDGE, MA — After several years of solid acceleration, annual growth in home improve- ment and repair spending is expected to soften in 2019, according to the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The latest in a series of "Leading Indicator of Remodeling Activity" reports, released by the Cambridge, MA-based Joint Center last month, projects that year-over-year increases in residential remodeling expenditures will reach a decade high of 7.7% in this year's fourth quarter, and then drift downward to a growth rate of 6.6% through the third quarter of 2019 (see graph, above). "Rising mortgage interest rates and flat home sales activity are expected to pinch otherwise very strong growth in homeowner remodeling spend- ing," said Joint Center Managing Director Chris Herbert. "Low for-sale inventories are presenting a headwind because home sales tend to spur investments in remodeling and repair." Despite the expected declining growth rate, "most remodeling market indicators – includ- ing home prices, permit activity and retail sales of building materials – continue to strengthen and will support above-average gains in spend- ing next year," the Joint Center noted. Continued Growth Forecast as 2018 Ends After several years of solid acceleration, annual growth in home improvement and repair spending is expected to soften, from a decade high of 7.7% in this year's fourth quarter to a year-over-year growth rate of 6.6% through the third quarter of 2019 (see Market Analysis, below). Despite the projected slowdown in the quarterly growth rate, annual expenditures for residential improve- ments and repairs by U.S. homeowners are nevertheless expected to grow to a record of more than $350 billion nationally. Source: Joint Center for Housing Studies, Harvard University THE PROJECTED SLOWDOWN IN GROWTH FOR RESIDENTIAL REMODELING Year-Over-Year Pct. Increases by Quarter 4.5% 5.0% 5.7% 6.2% 6.5% 6.3% 6.1% 6.3% 6.7% 7.1% 7.5% 7.7% 7.2% 6.9% 6.6% 2016-1 2017-1 2018-1 2019-1 (P) 2 2 2 2 (P) 3 3 3 3 (P) 4 4 4 (P) 10 Kitchen & Bath Design News • December 2018 BAROMETERS A LOOK AT KEY STATISTICS & TRENDS SHAPING THE INDUSTRY MARKET ANALYSIS

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