NAR: Pending home sales fall 4.7 percent
The Pending Home Sales Index, a forward-looking index released today by the National Association of Realtors (NAR), fell 4.7 percent to a rating of 84.7 in May, compared with an upwardly revised reading of 88.9 in April.
The index remains 14 percent below last year’s figure of 98.5. A home sale is listed as pending when the contract has been signed but the transaction has not closed.
“The overall decline in contract signings suggests we are not out of the woods by any means,” said Lawrence Yun, chief economist for the NAR, in a statement. Yun went on to promote a housing stimulus bill currently under consideration in the Senate, a legislative measure for which the NAR is lobbying heavily.
Regionally, the Pending Home Sales Index slipped 1.3 percent in the West to 97.5 in May, and the reading was down 2.9 percent to 77 in the Northeast. The index fell 6 percent to 78.6 in the Midwest and 7.1 percent to 84.5 in the South.
“Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half,” Yun said. “Price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.”
Double-digit pending sales gains in May from a year ago were recorded in Colorado Springs, Colo.; Sacramento, Calif.; and Spartanburg, S.C., according to the trade group.
The NAR also released an optimistic prediction for existing-home sales, which the group expects will rise to an annual pace of 5.75 million in the fourth quarter, compared with a pace of 5.01 million in the second quarter. In 2009, the NAR expects existing-home sales to rise 5 percent compared with 2008.
The aggregate median existing-home price is projected to fall 6.2 percent this year to $205,300, and then rise by 4.3 percent in 2009 to $214,100. The median new home price is projected to decline 3.2 percent to $239,300 this year and then rise 5.3 percent in 2009 to $251,900.
“The speed at which home prices has declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market,” Yun said.
New home sales are expected to fall 32.3 percent to 525,000 in 2008 and decline another 3.4 percent next year to 507,000.
“In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into 2009,” Yun added.
Two big western lumber producers will combine
Bennett Forest Industries and Riley Creek Lumber, two Idaho-based forest product companies, will merge operations to help court larger retail customers. Terms of the deal were not disclosed.
Executives from Bennett Forest Industries and Riley Creek Lumber told the Associated Press that production and delivery demands from large customers, including Home Depot and Lowe’s, made the move imperative in the midst of a lumber slump.
The move will help lead to the eventual expansion of the companies’ 550-person work force at four mills in north central and northern Idaho, according to the report.
Dick Bennett, who will remain on the combined company’s board of directors, told the AP that the move can help gain business from larger retailers, including Home Depot and Lowe’s, because those retailers “don’t want to do business with a mill only producing 100 million board feet. We’ll have enough volume where we can take on a fairly good contract with them.” Bennet Forest Industries currently produces about 185 million board feet annually, while Riley Creek produces about three times that amount.
Bennett also told the wire service that having four mills will offer an additional benefit of helping the companies cut some transportation costs.
Faucet function vs. fashion
The faucet category is one of the more artistic areas of home improvement. Many of the manufacturers treat their products as high art — displaying them in expensive press kits or in luxurious tradeshow booths.
Consumer research from Port Washington, N.Y.-based NPD Group shows the average price of faucets increased to $67.30 in 2008, up $4 from $63.30 in 2007. But there are signs that consumers may be choosing more practical, middle-of-the-road styles.
“This is a style-driven category, but we’re beginning to see a little more function over fashion,” said Mark Delaney, NPD Group’s director of home improvement.
For instance, sales of faucets over $75 peaked in the third quarter of 2007 at 40.9 percent, and have declined since, to the most recent figure of 30.3 percent. About 43 percent of the faucets sold from January 2006 to March 2008 were under $50.
Meanwhile, chrome’s position at the top of the preference list is being challenged by stainless steel, nickel and pewter, which gained 5.2 percentage points. While chrome is still the leading material choice, it dropped 8.6 points to 41.7 percent.
“When you start looking at finishes, faucets are one of the few home improvement categories that are very heavily advertised — it’s all about sexy elegant finishes and brands,” Delaney said.
Brand increased in importance as a purchase motivator, up 2.1 points to 20.5 percent, trailing price and features.
As in most home improvement categories, the warehouse home centers dominate the action — with 68.3 percent market share. The domination is seen across all income categories.
As the consumer’s income increases, so do his or her chances of shopping in a kitchen and bath specialty outlet. Likewise, as the consumer’s income decreases, so do his or her chances of shopping in a mass merchant. Interestingly, the warehouse home centers have a near identical share — 65 percent — of both the under 45K market and the over 100K market.
Regardless of retailer, faucet consumers showed a dramatic increase in selecting a retailer based on proximity. Close to home is now neck and neck with product availability as a reason to chose a retailer.