Strong 2005 Dimension Stone Sales?

By Harold A. Taylor, Jr.
Publisher, Dimension Stone Advocate News
President, Basics/Mines

Everyone in the industry is aware of the ongoing series of Fed interest-rate hikes, and is probably watching them apprehensively. Taking into account the rate hikes, what will 2005 bring?
Fortune (September 20, 2004) sees a scary situation and the housing bubble breaking. Housing prices have outpaced personal income and job growth, and people are buying to avoid being shut out of the housing market.
Most buyers are using adjustable-rate loans with interest rates that could be adjusted upwards in as little as six months. Property taxes are soaring, up an average 39 percent from 2000 to 2004 in 12 suburbs of major cities.
This is an emotion-driven market with an eye on easy money. Investors are buying 40 percent to 70 percent of completed condo units to rent out. Renting has now become much more reasonable than buying.
The bubble is mostly found in a number of major East Coast and West Coast cities; housing prices are fairly reasonable elsewhere. The bubble has already burst in Las Vegas, and new home prices dropped last July.
Business Week (November 1, 2004) sees the homebuilders being stretched thin. Their inventory of new-houses-to-sales ratio is at the highest level in seven years; new housing sales in many markets have weakened. Homebuilders are burning through cash rapidly, replacing it with debt and new issues of stock. One major homebuilder sold off some of its land inventory.
The most-recent statistics from McGraw-Hill Construction, for November, were down for both residential building and nonresidential building. Total construction for January-November 2004, compared to 2003, is now up only 1 percent.
The Overall Dimension Stone Production-Demand Index was 100 for 1997, 126 for 1998, 144 for 1999, 164 for 2000, 177 for 2001, 190 for 2002, 221 for 2003, and 274 for 2004 (semifinal). To provide perspective, imports accounted for over 82 percent, and domestic granite monument production, Indiana limestone production and domestic slate production accounted for less than seven percent of the 2003 Overall Production-Demand Index.
The Demand Index for Granite Countertops was 100 in 1997, 143 in 1998, 182 in 1999, 263 in 2000, 290 in 2001, 354 in 2002, 452 in 2003, and 691 in 2004 (semifinal). The Demand Index for Granite and Marble Tile was 100 in 1997, 117 in 1998, 123 in 1999, 145 in 2000, 153 in 2001, 169 in 2002, 199 in 2003, and 256 in 2004 (semifinal).
Examining the above statistics, overall U.S. dimensional-stone sales were up nearly 24 percent on average in 2004 from 2003, compared to up 15 percent in 2003 from 2002. Some market sectors were major exceptions; granite countertop sales in 2004 were up 53 percent over 2003, compared to a 28-percent increase in 2003 over 2002. Granite and marble tile sales in 2004 were up 28 percent by value over 2003, compared to up 18 percent in 2003 over 2002.
Dimension Stone Advocate News (DSAN) observers stated in the last outlook by firm on www.basicsmines.com/dimensionstone that 2004 Indiana limestone sales were about the same so far as 2003, and 2004 slate sales were also level with 2003.Sandstone sales in 2004 were up a few percent so far from 2003, and granite monument sales in 2004 were up five percent. DSAN observers say that 2004 granite countertop sales were up 15% to 20% over 2003. All these are likely to prove conservative.
Five DSAN observers spoken to early this January said that business is not weakening. See the Detailed Outlook at www.basicsmines.com for a more-complete and -recent assessment.
While the business press gives us solid grounds for concern, and there are signs of late-year weakness in the McGraw-Hill statistics, the 2004 DSAN dimension stone indexes go from strength to strength. The DSAN observers found no weakness in January 2005.
Nevertheless, a cautious attitude to 2005 sales expectations certainly seems to be advisable because history shows that Fed interest-rate hikes inexorably knock the economy downward sooner or later.