Home Improvement Spending Up Marginally

Written by Posted On Wednesday, 24 January 2007 16:00

According to the Joint Center for Housing Studies at Harvard, Americans spent $168.7 billion on home improvements and repairs in 2006, 1.5 percent more than in 2005.

From the comments of Joint Center officials last week, the increase was disappointing but understandable. The slumping for-sale market in many areas of the country has led many homeowners to delay or pass on major home-improvements, ending the double digit, quarter-to-quarter increases that the remodeling industry experienced over much of the last five years.

"Remodeling expenditures are likely to continue to stagnate until home sales begin to pick up," Joint Center director Nicolas P. Retsinas said.

Kermit Baker, director of the Joint Center's Remodeling Futures Program, said that "while remodeling activity continues to weaken, the easing should not be as severe as home building. Once home sales and prices begin to stabilize, owners will resume their home improvement plans."

Is the total amount of money spent on remodeling a good measure of activity? I assume that some homeowners, concerned about putting too much into their houses for a smaller return, have lowered expectations and cut spending. Yet, if you look at the number of people in hardware stores and home centers every day of the week but especially on the weekends, that 1.5 percent increase accounts for a lot of smaller projects.

At the same time the Joint Center came out with its data, the National Association of Homebuilders' survey of remodelers found that kitchen and bathrooms remain the top remodeling jobs, and master bedroom suites and great rooms are the two most popular home additions. The remodelers were surveyed during the first three quarters of last year.

The bulk of the demand for remodeling jobs continued to come from the baby boom generation, according to the NAHB research, which was conducted in conjunction with the quarterly surveying used to produce the NAHB's Remodeling Market Index. However, work requests from 30- to 40-year-old members of Generation X are on the rise, and they are turning out to be bigger spenders than the generation preceding them, the NAHB data show.

Rising energy prices last year appeared to have little impact on the demand for jobs related to improving residential energy efficiency, and a majority of remodelers were involved in making modifications for aging-in-place, although they said that most consumers aren't familiar with the concept. My feeling is that the NAHB should hold a contest to come up with a better description than aging in place, which better describes how I feel when a late train makes me miss the start of an important meeting.

In the first quarter of last year, when remodelers were asked about their most common jobs during 2005, 75 percent reported being hired to remodel kitchens, 67 percent remodeled bathrooms, 57 percent added rooms, 44 percent provided whole house remodeling and 40 percent replaced doors and windows.

The most commonly performed remodeling jobs were found to be consistently the same across the country, and they remained unchanged from 2001, when NAHB first asked remodelers this question.

The most popular additions or alterations in 2005 remained unchanged from the results of NAHB surveys in 2003 and 2004, with master bedrooms cited by 57 percent of the respondents, followed by great rooms, 49 percent and sunrooms, 26 percent.

Responding to questions geared to identifying the extent to which various age groups have increased their demand for remodeling jobs over the past five years:

  • 71 percent of the participants reported that they had seen no increase in business from Gen Y customers in their 20s and 25 percent saw some increase.

  • About a quarter of the remodelers reported no increase in work from Gen X customers, while 57 percent saw some increase and 20 percent indicated a significant increase.

  • Work requests from 41- to 64-year-old baby boomers increased significantly for 40 percent of survey participants, and increased to some extent for 43 percent.

  • About half of the remodelers reported either some or a significant increase in work requests from seniors 65 or older, while the other half saw no increase.

    One of the key findings of a recent analysis of 2005 American Housing Survey data by the Joint Center shows that each generation is outspending its predecessor on remodeling. Gen Xers, for example, are spending more on home improvement today than people their same age in 1995 and are poised to eventually play a dominant role in the remodeling market.

    The Joint Center analysis also shows that as the share of home-owning households headed by minorities continues to grow, to a projected 25 percent by 2015, this group can be expected to account for a commensurate share of the remodeling market.

    Asked during last year's second quarter if their company was involved in home modification work related to aging-in-place, about 60 percent of remodelers responded in the affirmative, basically the same as in 2004. Forty-three percent of the companies were undertaking aging-in-place work for 45- to 54-year-olds, up from 20 percent when the same question was asked in 2004.

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