With interest rates expected to stabilize, and existing-home prices showing signs of a decline, a sustained housing rebound is likely to begin in the latter part of 2023, according to leading market analysts. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations were the following:
HOUSING STARTS & NEW-HOME SALES
Single-family housing production remains at an “anemic pace” as builders continue to wrestle with a host of issues, the National Association of Home Builders said last month. “Builders continue to grapple with increased market uncertainty due to ongoing building material supply bottlenecks, volatile mortgage rates and increased jitters in the banking sector,” said NAHB chairman Alicia Huey, as overall housing starts rose to a seasonally adjusted annual rate of 1.45 million units, according to the latest government figures. Despite the challenges, however, rising builder confidence “is signaling a turning point for home building later in 2023,” observed NAHB Chief Economist Robert Dietz. “We expect volatility in the months ahead,” Dietz said. “However, interest rates are expected to stabilize and move lower in the coming months, and this should lead to a sustained rebound for single-family starts in the latter part of 2023.”
EXISTING-HOME SALES
Existing-home sales reversed a 12-month slide in February, registering the largest monthly percentage increase since July 2020, according to the National Association of Realtors, which also reported that the median existing-home price for all housing types declined 0.2%, ending a streak of 131 consecutive months of year-over-year increases, the longest on record. Existing-home sales are running at a seasonally adjusted annual rate of 4.58 million units, according to the latest available figures. Year-over-year sales were down nearly 23% from the same time in 2022. “Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said Lawrence Yun, chief economist for the Washington, DC-based NAR. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs,” Yun noted, adding, however, that inventory levels remain at historic lows. The annual share of first-time buyers is hovering around 26%, the lowest since NAR began tracking the data.
RESIDENTIAL REMODELING
The nation’s remodeling sector “remains on solid ground” in 2023, the National Association of Home Builders said. The Washington, DC-based NAHB estimated that residential remodeling activity increased 7% in 2022, following a growth rate of nearly double that (13%) in 2021, as homeowners continue to utilize their home “for a wider range of purposes such as offices, schools and gyms.” With housing demand remaining weak, however, the annual pace of remodeling growth is expected to slow, posting a nominal 5% gain this year and a 4% increase in 2024, the NAHB said.
Industry ‘Prepared’ for Projected 2023 Downturn, KBMI Finds
BETHLEHEM, PA — Kitchen and bath industry executives are “prepared” to weather an economic downturn amid a lack of confidence in the U.S. economy, according to the latest in a quarterly series of Kitchen & Bath Market Indexes conducted by the National Kitchen & Bath Association and John Burns Real Estate Consulting.
According to the NKBA and John Burns Real Estate Consulting, the fourth-quarter 2022 KBMI posted a rating of 61.0 on a 100-point scale, down from 63.2 in the previous quarter (see related graph, above).
The KBMI revealed that surveyed industry professionals reported a 5% sales increase on a year-over-year basis in the fourth quarter of 2022, a steep decline from the 12.1% growth reported 12 months earlier. 56% of those polled said that fourth-quarter profit margins were steady, with 31% of those surveyed saying they expect positive 2023 full-year revenue growth, although slowing demand “is concerning” for the latter half of 2023, the report found.
Among the KBMI’s other findings:
- Labor shortages are extending average project timelines, causing a growing number of consumers to cancel or postpone their kitchen and bath projects.
- Industry professionals say that a shortage of labor is hindering their ability to complete existing projects, and overall labor costs are making it more difficult to maintain margins. Project backlogs are expected to help offset slowing demand in 2023.
- Kitchen and bath pros report that many clients are reducing their project scope, and opting to break large projects into smaller, more affordable ones.
- Waning pricing power for discretionary projects will weigh on profit margins if industry professionals can’t successfully raise prices. Kitchen and bath industry professionals reported a 9% cost increase from vendors in 4Q22.