Kitchen & Bath Design News

AUG 2017

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POSITIVE MARKET fundamentals should offset the recent softness in housing, resulting largely from shortages of labor and available homes for sale, industry analysts predict. 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 Ongoing job growth, rising demand and low mortgage rates "should keep the single-family sector moving forward this year," according to the latest analysis by the National Association of Home Builders. Pointing to "some weak- ness" in housing after a strong start to the year," the Washington, DC-based NAHB noted last month that builder sentiment about current and future market conditions remains "consistently sound, reflecting the ongoing gradual recovery of the housing market," while single-family housing starts are up 7.2% over the same time a year ago. NAHB analysts ob- served, however, that builders continue to face significant headwinds. "As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over a shortage of skilled labor and buildable lots that are impeding stronger growth in the single-family sector," said NAHB Chief Economist Robert Dietz. EXISTING-HOME SALES Stubbornly low supply levels are continuing to thwart sales of existing homes, with new and existing inventory not keeping up with the pace at which homes are coming off the mar- ket, the National Association of Realtors report- ed last month. Noting that every major region in the U.S. except for the Midwest saw a retreat in existing-homes sales, the Washington, DC-based NAR said that "demand is easily out- stripping supply…stymieing many prospective buyers from finding a home to purchase." "Realtors continue to voice the frustration their clients are experiencing because of the insuffi- cient number of homes for sale," said NAR Chief Economist Lawrence Yun, adding that there is little evidence the low supply levels will dissipate soon. Despite the recent market softening, re- sales remain 1.6% above a year ago, at a season- ally adjusted annual rate of 5.57 million units. CABINET & VANITY SALES Sales of kitchen cabinets and vanities advanced in May, compared to sales for the same month last year, the Kitchen Cabinet Manufacturers Association said last month. According to the Reston, VA-based KCMA, manufacturers partic- ipating in the association's "Trend of Business" survey reported that May sales of cabinets and vanities rose 5.4% over May of 2016. Sales of stock cabinets increased 7.8% and semi-custom cabinet sales rose 4.6%, while custom cabinet sales decreased by 0.8%, KCMA said. Year-to-date sales through May were up 4.5% compared to the same five-month period in 2016, the association added. APPLIANCE SHIPMENTS Domestic shipments of major home applianc- es posted sharp growth in May compared to the same month last year, while pacing well ahead of 2016 through the first five months of 2017, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that May appliance shipments totaled 7.0 million units, up 8.7% from the 6.44 million units shipped during the same month in 2016. Year-to-date sales through May were 5.5% higher than the same five-month period last year, AHAM said. Housing Market, Despite Gains, Hamstrung by Tight Supply CAMBRIDGE, MA — A decade after the onset of the Great Recession, the housing market has finally "returned to normal," according to the latest State of the Nation's Housing report, released by the Joint Center for Housing Studies of Harvard University. According to the study, housing demand, home prices and construction volumes are all on the rise, and the number of distressed homeown- ers has fallen sharply. However, extremely tight supplies are raising housing costs and adding to concerns about affordability (see graphic, above). "While the recovery in home prices reflects a welcome pickup in demand, it's also being driven by very tight supply," said Chris Herbert, man- aging director of the Cambridge, MA-based Joint Center. "Even after seven years of construction growth, the U.S. added less new housing over the last decade than in any 10-year period going back to at least the 1970s. The rebound in single-family construction has been particularly weak." Herbert added: "Any excess housing that may have been built during the boom years has been absorbed, and a stronger supply is going to be needed to keep pace with demand, particularly for moderately priced homes." Looking ahead, the report noted that, as the members of the millennial generation move into their late 20s and early 30s, the demand for entry-level homeownership is set to soar. Forecasts Upbeat in Face of Headwinds 5.2 2014 4.2 April, 2017 3.8 March, 2017 3.8 February, 2017 3.5 January, 2017 3.6 December, 2016 4.8 2015 Source: National Association of Realtors Although housing strengthened in 2016, single-family construction, traditionally the largest source of residential investment, remained historically weak, driving prices above pre-recession peaks in many areas. At the same time, inventories of existing homes for sale also hit a record low in January, down considerably from 2014 and 2015, as reflected above. The supply of existing homes on the market stood at just 3.5 months, well below 6.0 months, the conventional measure of a balanced market. Tight supplies are also hindering remodeling growth, since existing-home sales account for a sizeable percentage of annual renovation expenditures (see Market Analysis, below). THE DWINDLING SUPPLY OF EXISTING HOMES FOR SALE Months' Supply of Homes on the Market 12 Kitchen & Bath Design News • August 2017 BAROMETERS A LOOK AT KEY STATISTICS & TRENDS SHAPING THE INDUSTRY MARKET ANALYSIS

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