Kitchen & Bath Design News

AUG 2019

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AFFORDABILITY CONCERNS and other factors, including labor shortages and tariff-related price increases, continue to place restraints on growth in the housing and remodeling sectors, according to market analysts. Among the key statistics and forecasts released in recent weeks by government agen- cies, research firms and industry-related trade associations were the following: HOUSING STARTS & NEW-HOME SALES Affordability concerns throughout the country, especially in high-cost markets, continue to put a damper on housing starts and new- home sales, and will likely result in a flat year for single-family housing, the National Association of Home Builders said last month. "Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for en- try-level buyers," said NAHB Chief Economist Robert Dietz. At the same time, Dietz said, builders continue to grapple with excessive regulations, a shortage of lots and a lack of skilled labor. Also serving to depress market growth are rising development and construc- tion costs, as well as ongoing concerns over the impact of tariffs on construction-material prices, the NAHB said. RESIDENTIAL REMODELING Annual gains in homeowner spending on improvements are expected to moderate across more than half the nation's largest metro mar- kets this year, according to projections released by the Joint Center for Housing Studies of Harvard University. While no major metros are projected to see spending decline, Joint Center researchers forecast that the pace of spending by homeowners will slow this year in 29 of the 49 major metros tracked. Despite the decel- eration, however, remodeling gains "should remain strong and even accelerate through year-end in areas where remodeling permitting, house prices and homebuilding have picked up," Harvard analysts said. The strongest growth is expected to be among metros in the West, analysts added. EXISTING-HOME SALES With consumer confidence on the rise, the market for existing-home sales should improve in the months ahead, the National Association of Realtors predicted last month. According to Lawrence Yun, chief economist for the Washington, DC-based NAR, lower-than-usual mortgage rates are creating "extremely attrac- tive conditions" for prospective home buyers and have resulted in an increase in pending sales. Whether or not additional interest-rate cuts are implemented, "job creation and a rise in inventory will drive more buyers to enter the market," Yun predicted. APPLIANCE SHIPMENTS Domestic shipments of major home appliances rose in May compared to the same month in 2018, although year-to-date shipments lagged those of a year ago, according to the Association of Home Appliance Manufacturers. The Washington, DC- based AHAM rep orted last month that May ap- pliance shipments totaled 6.93 million units, up 2.7% from the 6.75 million units shipped in May 2018. Despite the gain, year-to-date shipments through May were off 5.1% from the same five- month period a year ago, AHAM said, noting that declines were posted in shipments of cooking, kitchen clean-up and refrigeration products. Lag in Housing Production Seen Stunting Market Growth CAMBRIDGE, MA — With the nation's econ- omy on solid footing, the number of people forming households has rebounded from post-recession lows, although housing produc- tion has not kept pace with household growth. The 2019 State of the Nation's Housing report, released last month by the Joint Center for Housing Studies at Harvard University, found that the shortfall in housing production "is keeping pressure on house prices and eroding affordability for modest-income households in many markets." Joint Center researchers found that while household growth "is now back, new-home construction remains depressed, with additions to supply barely keeping pace with the number of new households." While several factors may be contributing to the slow construction recovery, the most significant factors are rising land prices and regulatory constraints on development, said Joint Center Managing Director Chris Herbert. "These constraints raise costs and limit the number of homes that can be built in places where demand is highest," Herbert said, adding that a large percentage of new housing is in- tended for the high end of the market. Looking forward, the report predicted that millennials and baby boomers will continue to push household growth, spurring demand in remodeling and entry-level home-building. The biggest question, researchers said, is whether the market can supply housing that's within reach of most household incomes. Housing Flat Amid Affordability Woes The overall size of new homes peaked in 2016, and for the last three years has continued to mod- erate, according to a newly released survey of residential architects. The survey also found that homeowners continue to place a priority on accessibility features rather than size. 'Homeowners want more flexibility, both inside and outside the house, and they want to use these spaces as they age,' said Kermit Baker, chief economist for the American Institute of Architects. Source: American Institute of Architects Q. 1 Home Design Trends Survey THE SOFTENING IN SIZES FOR NEW SINGLE-FAMILY HOMES % of Residential Architects Reporting 'Increasing' Minus % Reporting 'Decreasing' Home Sizes 2015 2016 2017 2018 2019 (1st Qtr.) 20% 25% 20% 24% 22% 10 Kitchen & Bath Design News • August 2019 BAROMETERS A LOOK AT KEY STATISTICS & TRENDS SHAPING THE INDUSTRY MARKET ANALYSIS

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