Kitchen & Bath Design News

JAN 2019

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A GROWING ECONOMY, highlight- ed by low unemployment, wage growth and a growing inventory of homes for sale, should boost the housing market in 2019, even as rising interest rates impact home affordability, analysts say (see Editorial, Page 7; Forecast, Page 38). Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry trade associations were the following: HOUSING STARTS Rising affordability continues to weigh on both single-family housing production and builder con- fidence, even though 2018 construction volume is expected to be the highest since the 2008 econom- ic downturn. "A growing economy and positive demographic tailwinds are supporting housing demand, [even] as interest rates rise," said Robert Dietz, chief economist for the National Association of Home Builders. "However, policymakers should take note of the [recent] decline in builder confidence as a sign that housing affordability conditions will weigh on the market," Dietz added (see related graph, at right). EXISTING-HOME SALES A growing inventory of homes for sale has witnessed more buyers stepping back into the housing market, according to Lawrence Yun, chief economist for the National Association of Realtors. "As more [housing] inventory enters the market, home-price growth has begun to slow more meaningfully," Yun said. "This allows for much more manageable, less frenzied buying conditions," he added. Resale inventory as 2018 neared an end was 1.85 million units, a rise from 1.80 million a year earlier, the Washington, DC-based NAR reported. However, Yun cau- tioned that "rising interest rates and increasing home prices continue to suppress the rate of first-time buyers…[and] home sales could decline further prior to stabilizing." Yun estimated that existing-home sales would finish 2018 at a pace of 5.345 million units, a decline from 2017 (5.51 million units). In 2019, resales are projected to increase by about 1%, to 5.4 million. RESIDENTIAL REMODELING U.S. homeowners who leveraged secured financ- ing to pay for renovations in 2017 were able to take on larger home improvement projects, with nearly three times the median spend of those who paid for renovations with cash only ($32,000 versus $13,000), according to a study by Houzz Inc., in collaboration with Bank of America. The study explored the role of secured financing in home improvement, and found that one in seven homeowners who used secured financing, such as a home equity line of credit, home equity loan or cash-out refinancing, took on major remodel- ing projects. "Recent record gains in home equity give homeowners greater confidence to invest in their home," said Nino Sitchinava, Houzz principal economist. "Our study confirms that a meaningful share of homeowners are tapping into home equity to fund large-scale renovations, such as kitchen and bathroom remodels." APPLIANCE SHIPMENTS Domestic shipments of major home applianc- es remained flat in October 2018 compared to October 2017, with year-to-date shipments re- maining just below those of 2017, according to the Association of Home Appliance Manufacturers. AHAM reported last month that October appliance shipments totaled 5.69 million units, down 0.1% from the 5.70 million units shipped in October 2017. Year-to-date sales through October were 0.6% below sales during the same 10-month period in 2017, AHAM said. Needs of Aging Homeowners Seen as Increasingly Acute CAMBRIDGE, MA — More than half of U.S. households are currently headed by some- one aged 50 or over – and the living arrange- ments, financial resources, health and abilities of those households will present "serious challeng- es" in the years to come, according to a report released last month by the Harvard Joint Center for Housing Studies (see Editorial, Page 7). The report cautions that baby boomers will increasingly need more accessible and supportive housing than is currently available. It also warns that many aging homeowners may not be finan- cially prepared for retirement. "We need to address gaps in the affordability and accessibility of our housing stock, which are essential to older adults' independence and well-being," said Joint Center researcher Jennifer Molinsky. "As the number of [older] households grows, [it's] essential that we strengthen the links between housing, health care and other services." The Harvard report's analysis of demographic data finds, among other key conclusions, that there aren't enough accessible units to serve the growing number of those with physical challeng- es. In 2016, for example, 17% of households age 50 and over included someone who had difficulty climbing stairs or walking (including 43% of those age 80 and over). However, according to the most recent estimates, only 3.5% of U.S. homes had key features for those with mobility challenges. "Given these trends, supportive and accessible housing will be in even greater demand for aging households," the Joint Center report noted. Housing Growth Forecast for 2019 Graph reflects how housing market conditions have markedly improved since the market's nadir in 2008. The Housing Market Index (HMI), based on a monthly survey of home builders, asks re- spondents to rate market conditions for the current and future sale of new homes. The November 2018 decline was attributed to a drop in builder confidence amid rising affordability concerns (see related story, at left). Source: National Association of Home Builders 10-YEAR COMPARISON OF HOUSING MARKET CONDITIONS Seasonally Adjusted Housing Market Index, November, 2008-2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 69 63 62 58 54 45 19 16 17 9 60 10 Kitchen & Bath Design News • January 2019 BAROMETERS A LOOK AT KEY STATISTICS & TRENDS SHAPING THE INDUSTRY MARKET ANALYSIS

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