Remodeling Poised for Growth
Remodeling expenditures are expected to increase during the next several years at an inflation-adjusted 3.5 percent average annual rate. This is below the pace during the housing boom but sharply recovering from the recent downturn, according to the Cambridge, Mass.-based Joint Center for Housing Studies at Harvard University.
The industry, which saw a double-digit decline since its peak in 2007, is beginning to return to a more typical pattern of growth, the report says. In the next five years, the focus of remodeling spending will shift from upper-end discretionary projects to replacements and systems upgrades, the report continues. Remodeling contractors have a number of growth opportunities generated by underinvestment in distressed properties, lower mobility, changing migration patterns and the rise of environmental awareness.
“Lower household mobility following the housing-market crash means that in the coming years homeowners will increasingly focus on improvements with longer paybacks, particularly energy-efficient retrofits,” says Kermit Baker, director of the Remodeling Futures Program at JCHS.
“A New Decade of Growth for Remodeling” is the sixth and latest report in the Improving America’s Housing series, published by the Remodeling Futures Program at JCHS. To see the complete report.
Pennsylvania Remodeler Makes Historic Move
Power Home Remodeling Group, formerly Brookhaven, Pa.-based Power Windows and Siding, has relocated its national headquarters to the Wharf at Rivertown in Chester, Pa., an architecturally and historically significant mixed-use office and retail project on the Delaware River that features the renovation of the former Delaware County Power Plant. More than 400 employees now are based at the new 58,000-square-foot headquarters. The state of Pennsylvania in 2010 awarded Power Home Remodeling Group a $200,000 Opportunity Grant that enabled the company to hire additional employees and supported the move to the new headquarters, which is located in a Keystone Opportunity Zone. Power Windows and Siding was listed as No. 4 on Qualified Remodeler’s 2010 Annual Top 500 listing.
Confidence in Housing Market Grows
Homeowners are steadily gaining more confidence in the housing market and real-estate prices compared to previous waves of data, according to the Chicago Booth/Kellogg School Financial Trust Index, a quarterly look at Americans’ trust in the nation’s financial system by Evanston, Ill.-based Northwestern University’s Kellogg School of Management and University of Chicago Booth School of Business. According to the index, 54 percent of people surveyed this quarter forecast that prices will remain stable, a sharp increase compared to 46 percent in September 2010. Similarly, fewer respondents (22 percent) now believe that home values will decrease during the next 12 months (as compared to 31 percent three months ago).
Pending Home Sales
Gradual Recovery Predicted
An upward trend in pending home sales in the second half of 2010 may indicate a gradual recovery into 2011, according to the Washington, D.C.-based National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November 2010 from a downwardly revised 89.1 in October. The index is 5 percent below a reading of 97 in November 2009.
Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” he said. “But further gains are needed to reach normal levels of sales activity.”
Sheldon Yellen, chief executive officer of Birmingham, Mich.-based Belfor USA Group Inc., took his turn as the incognito boss on a recent episode of CBS’s “Undercover Boss,” a reality series in which heads of major corporations disguise themselves to work among their employees. Yellen sported an uncharacteristic beard, fake glasses and a wig as he struggled with day-to-day challenges, including hanging drywall and disposing of dead animals, at the side of unsuspecting staff members. Belfor has ranked No. 1 on Qualified Remodeler’s Top 500 listing for the past 10 years. An enlarged reproduction of a recent QR Top 500 cover was seen briefly in one of the scenes in Belfor’s offices.
Indices Continue Decline
New York-based Standard & Poor’s S&P/Case-Shiller Home Price Indices show a deceleration in the annual growth rates in 17 of the 20 MSAs and the 10- and 20-City Composites in November compared to what was reported for October 2010. The 10-City Composite was down 0.4 percent and the 20-City Composite fell 1.6 percent from their November 2009 levels.
Home prices fell in 19 of 20 MSAs and both composites in November from their October levels. In November, only four MSAs—Los Angeles, San Diego, San Francisco and Washington, D.C.—showed year-over-year gains. The composite indices remain above their spring 2009 lows; however, nine markets—Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, Portland (Ore.), Seattle and Tampa—hit their lowest levels since home prices peaked in 2006 and 2007, meaning average home prices in those markets have fallen even further than the lows set in the spring of 2009.
Survey Says Homeowners Ready to Remodel
Homeowners are ready to jump back into home improvement in 2011, and contractors say they’re still willing to cut prices to get business, according to recent Indianapolis-based Angie’s List surveys.
Ninety percent of the Angie’s List members responding to a January 2011 survey say they plan to spend, on average, 5 percent of their homes’ value making improvements and repairs. In a separate poll of contractors rated on Angie’s List, also conducted in January, 80 percent of the home-improvement specialists said they were willing to drop their prices in 2010 to get a job. Only 43 percent were willing to drop their prices in a similar 2008 survey.
More than half the companies that offer discounts said they would discount up to 10 percent, but nearly a quarter of others would cut up to 20 percent.
The economic climate in 2010 caused 37 percent of respondents to postpone remodeling plans. This year, Angie’s List members say they plan to invest an average of $17,500 on home improvements. Their specific interests are as follows:
- 59 percent want to update or improve their home.
- 22 percent plan to make repairs.
- 9 percent are looking to increase the resale value of their homes.
Fewer Americans Going Green
American adults overall are now less likely than they were in the summer of 2009 to espouse certain green attitudes and engage in various environmentally friendly activities, according to a recent Harris poll conducted by New York-based Harris Interactive.
Residential Fall Protection Toughened
The Washington, D.C.-based U.S. Department of Labor’s Occupational Safety and Health Administration announced that residential builders may no longer bypass or use alternative fall-protection methods, withdrawing a 1995 order issued as a temporary policy that was the result of concerns about the feasibility of fall protection in residential construction.
The new directive says that “workers engaged in residential construction 6 feet or more above lower levels must be protected by conventional fall protection, i.e., guardrail systems, safety net systems or personal fall arrest systems. Contractors, if they can demonstrate compliance is infeasible or presents a greater hazard, still have the option of implementing a written, site-specific alternative fall-protection plan.”
For more information, visit OSHA.gov/doc/residential_fall_protection.html.
Across the U.S., 35% of all homes have a working fireplace while only 2.5% are heated primarily with an open fireplace or a wood-burning stove. Just five years ago, that proportion was more than twice as large.
Source: U.S. Census Bureau
Remodeling Activity Index Launched
Austin, Texas-based BuildFax recently launched the BuildFax Residential Remodeling Index, reporting residential remodeling activity across the nation. The information is derived through related building-permit activity filed with local building departments. The index will report remodeling activity for the entire U.S., as well as for the four major regions of the country.
Hurd Acquires SuperSeal
Medford, Wis.-based Hurd Windows & Doors announced it has acquired SuperSeal Manufacturing Co. Inc., a 50-year old, privately held, high-end vinyl window manufacturer based in South Plainfield, N.J. The acquisition supports Hurd Windows & Doors’ strategic growth plan with emphasis on the replacement window market.
Monthly Index Unchanged
U.S. house prices were unchanged on a seasonally adjusted basis from October to November 2010, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.7 percent increase in October was revised downward to a 0.2 percent increase. For the 12 months ending in November, U.S. prices fell 4.3 percent. The U.S. index is 14.9 percent below its April 2007 peak and roughly the same as the August 2004 index level.