July 5, 2022

Challenges Persist as 2021 Winds to Close

The U.S. housing and residential remodeling markets continued to post gains as 2021 wound to a close, although COVID-related supply chain disruptions, coupled with labor and materials shortages, continued to put a crimp on more-robust growth. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations were the following:

RESIDENTIAL REMODELING

Demand for remodeling remains strong, and remodelers “are doing quite well as long as they can adequately deal with material and labor shortages,” according to the latest Remodeling Market Index (RMI) compiled by the National Association of Home Builders. The Washington, DC-based NAHB last month released its NAHB/Royal Building Products Remodeling Market Index (RMI) for the third quarter of 2021, posting a reading of 87, up five points from the third quarter of 2020. The finding is a signal of residential remodelers’ confidence in their markets, for projects of all sizes, the NAHB said. “We are seeing strong demand and continued optimism in the residential remodeling market, despite the fact that supply constraints are severe and widespread,” said NAHB Chief Economist Robert Dietz. “For example, well over 90% of remodelers in the third quarter RMI survey reported a shortage of carpenters. And 57% of remodelers reported having slightly raised prices for projects over the last six months, with another 28% indicating a significant increase in price, due in part to higher material costs and ongoing strong demand. Half of these remodelers reported some pricing out of demand due to higher prices for remodeling projects.”

HOUSING STARTS & NEW-HOME SALES

Single-family home sizes are reportedly rising as an offshoot of the COVID-19 pandemic, reversing a recent trend toward downsizing, as homeowners are seeking additional residential space for a wider range of purposes, particularly teleworking and school-related activities. According to the National Association of Home Builders, the median size of a newly built single-family home increased to 2,297 sq. ft., while the average size for new single-family homes increased to 2,540 sq. ft. Following Great Recession lows, home sizes rose between 2009 to 2015, as entry-level new construction was constrained, according to the NAHB. In contrast, home sizes declined between 2016 and 2020, as more starter homes were developed, the NAHB said. “Going forward, we expect home sizes to increase again, given a shift in consumer preferences for more space due to the increased use and roles of homes in the post-COVID-19 environment,” said NAHB’s Dietz.

EXISTING-HOME SALES

Current high prices are resulting in “an unbalanced market,” although home prices would “normalize with additional supply,” according to the chief economist for the National Association of Realtors. Total housing inventory, according to the latest NAR figures, was down 13.4% from one year ago. Unsold inventory sat at a 2.6-month supply at the current sales pace, down from 3.0 months at the same time last year, the NAR reported. The median existing-home price was up 14.9% from the same time in 2020. The market has witnessed more than 100 straight months of year-over-year gains, the NAR noted, adding that the pace of price appreciation has outpaced wage gains, “making homeownership increasingly unattainable.”

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