Homeowner improvement spending is likely to reach a cyclical bottom in the current quarter and steadily increase through 2010 according to the Leading Indicator of Remodeling Activity (LIRA), released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual declines in home improvement spending will ease from the current rate of 12.0 percent to 3.1 percent in the third quarter of 2010.
“It appears we may be near the bottom of the current remodeling cycle,” says Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “With signs of stabilization in the national economy, homeowners are once again planning home improvement projects.”
Remodeling industry fundamentals are generally beginning to turn positive. “Sales of existing homes are on the rise and home price declines are moderating in most markets across the country,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies. “Financing costs are also favorable, although credit availability remains tight for many households.” |
Existing Home Sales
December Decline No Surprise
After a rising surge from September through November, existing-home sales fell as expected in December after first-time buyers rushed to complete sales before the original November deadline for the tax credit. However, prices rose from December 2008 and annual sales improved in 2009, according to the National Association of Realtors.
Existing-home sales — including single-family, townhomes, condominiums and co-ops — fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million units in December from 6.54 million in November, but remain 15.0 percent above the 4.74 million-unit level in December 2008.
For all of 2009 there were 5,156,000 existing-home sales, which was 4.9 percent higher than the 4,913,000 transactions recorded in 2008; it was the first annual sales gain since 2005.
Lawrence Yun, NAR chief economist, said there were no surprises in the data. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” he said. “We’ll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit. By early summer the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010. However, the job market remains a concern and could dampen the housing recovery — job creation is key to a continued recovery in the second half of the year.”
'An NAR practitioner survey shows first-time buyers purchased 43 percent of homes in December, down from 51 percent in November. Repeat buyers rose to 42 percent of transactions in December from 37 percent in November; the remaining sales were to investors.
The national median existing-home price for all housing types was $178,300 in December, which is 1.5 percent higher than December 2008. “The median price rose because of an increased number of mid- to upper-priced homes in the sales mix,” Yun said. It was the first year-over-year gain in median price since August 2007.
More Homeowners Plan Projects
After a year of steady declines in home remodeling, the Spring 2010 www.remodelormove.com U.S. Remodeling Sentiment Report reveals a 13 percent increase in the number of homeowners who say they will remodel in the next 12 months. This increase follows a 5 percent increase in last year’s spring 2009 report. The continuing upward swing in remodeling sentiment indicates that 2010 will show a strong increase in remodeling activity, the report concludes.
The Spring 2010 Sentiment Report, a survey of 5,000 homeowners in the United States who are considering remodeling, also shows that the recession has had several impacts on U.S. homeowners. These include:
- The most popular projects in the past — remodeling the kitchen and bathrooms — have decreased in popularity, as adding a bathroom has taken the honors of the most popular project. This makes sense since, for many homeowners, updating an existing room can be put off because it is often seen as a “luxury,” while for many the addition of a bathroom is a necessity due to changes in the needs of the family.
- Interest in do-it-yourself projects, both the actual building as well as acting as their own general contractor, has remained steady throughout the economic downturn.
- Economizing on the cost of materials is growing in popularity at the same time, as fewer homeowners are reporting they will use expensive materials for their remodel. The percentage of homeowners reporting they will use average costing materials remains the same.
- The number of homeowners reporting they are “excited” about remodeling has climbed to an all-time high of 54 percent, which is primarily due to homeowners who aren’t excited about remodeling choosing to put their plans on hold to wait until the recession is over. This may be a costly choice for homeowners since the cost to remodel now is as much as 20 percent lower than in 2006, according to a cost-to-remodel study published earlier this year at www.remodelormove.com.
Mixed Messages in Data
Data through November 2009, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, show that the annual rates of decline of the 10-city and 20-city composites continue to improve in spite of price declines being measured across many markets during November. This marks approximately 10 months of improved readings in the annual statistics, beginning in early 2009, and is the third consecutive month these statistics have registered single-digit declines, after 20 consecutive months of double-digit declines.
The annual returns of the 10-city and 20-city Composite Home Price Indices declined 4.5 percent and 5.3 percent, respectively, in November compared to the same month last year. All 20 metro areas and both composites showed an improvement in the annual rates of decline with November’s readings compared to October.
“While we continue to see broad improvement in home prices as measured by the annual rate, the latest data show a far more mixed picture when you look at other details,” says David M. Blitzer, chairman of the Index Committee at Standard & Poor’s.
“Only five of the markets saw price increases in November vs. October. What is more interesting is that four of the markets — Charlotte, Las Vegas, Seattle and Tampa — posted new low index levels as measured by the past four years. In other words, any gains they might have seen in recent months have been erased and November is now considered their current trough value.
“On the flip side, there are still some markets that continue to improve month-over-month. Los Angeles, Phoenix, San Diego and San Francisco have seen prices increase for at least six consecutive months. Looking at the annual figures, four markets — Dallas, Denver, San Diego and San Francisco — have finally entered positive territory, something we really haven’t seen in at least two years in most markets, he said.
“To add more mixed signals, we are in a seasonally weak period for home prices, so the seasonally adjusted data are generally more positive, with 14 of the markets and both composites showing improved prices in November. On balance, while these data do show that home prices are far more stable than they were a year ago, there is no clear sign of a sustained, broad-based recovery,” he added.
As of November 2009, average home prices across the United States are at similar levels to where they were in late 2003. From the peak in the second quarter of 2006 through the trough in April 2009, the 10-city composite is down 33.5 percent and the 20-city composite is down 32.6 percent. The peak-to-date figures through November 2009 are -30.0 percent and -29.2 percent, respectively.
Cools after January Spike
U.S. consumer confidence cooled in February as worries over every facet of their financial situation mounted, according to recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. Economic attitudes soured across the board, with consumers viewing the current economy negatively and displaying increased pessimism about the future. As a result, the RBC Index for February 2010 stands at 39.4, down 18.9 points from January’s 58.3 reading.
‘In-Home Selling’ Webinar Set
“The Science of In-Home Selling,” the second Webinar in a series of six educational opportunities of interest to exterior contractors, is scheduled for February 24 at 2 p.m. Eastern and will feature Dave Yoho of Dave Yoho and Associates and his colleague Brian Smith.
Topics include: The seven myths of in-home selling; why some prospects buy and some don’t — the psychological laws of selling; cultural, emotional and perceptual blocks; selling to the prospect’s value system; needs assessment, proxemics and the product presentation; and selling your price and getting the order.
The Webinar, jointly moderated by Tim Musch of MarketSharp and Patrick O’Toole of Qualified Remodeler magazine, is one of six educational opportunities scheduled during the first six months of 2010 in the form of Webinars offered via ExteriorContractor.com.
ExteriorContractor.com is the Web site affiliated with the Exterior Contractor section that appears six times each year in Qualified Remodeler magazine. For information and to register, go to: www.exteriorcontractor.com/webinars2010.
New Home Market
Unemployment Will Limit Growth
The end of the economic recession along with the continuation of low mortgage interest rates and stabilizing housing prices will result in growth in the nation’s housing market this year, according to economists speaking at the International Builders’ Show in Las Vegas. But improvements will come slowly, they said, as high unemployment levels continue to discourage consumers and push home foreclosures higher.