A much-needed boost to the struggling remodeling market may be around the corner in the form of legislation that should be supported by all facets of a kitchen/bath industry being dragged to its knees by the ongoing housing slump.
The potential relief is currently on Capitol Hill in the form of a bill – called the “Home Improvements Revitalize the Economy (HIRE) Act” – that would provide tax credits to stimulate residential remodeling, including the purchase of kitchen cabinets and other key products.
Similar in aim to existing tax incentives for first-time home buyers, the HIRE Act would offer remodeling consumers significant tax credits for purchasing home improvement products that meet recognized environmental standards.
Retailers, contractors and building product resellers would receive similar credits for covered purchases under the terms of the bill, which is being strongly backed by the Kitchen Cabinet Manufacturers Association (KCMA) and 13 other industry-related trade organizations.
There’s ample reason for their support.
After years of growth, residential construction remains mired in its worst decline since World War II. Housing and home improvement demand has withered under the weight of job losses, weak consumer confidence, and stock market declines. Housing starts stand near 60+ year lows. Home sales and other key indices are down markedly from peak levels. Foreclosures continue to soar. The number of vacant homes is at near-record levels.
As if that wasn’t bad enough, tight credit and evaporating equity have impacted homeowners’ ability to engage in equity withdrawals or cash-out mortgage refinancing, key funding sources for home-related investments. As a result, consumers are deferring big-ticket home-related purchases they once made without batting an eye.
According to estimates, the U.S. home furnishing and building products market lost $67 billion in direct economic value, along with 273,000 jobs, from 2007 to 2008. It is expected to lose another $74 billion and 299,000 jobs this year.
Those numbers are mirrored in shipments of key kitchen and bath products. The KCMA, for example, reports that year-to-date sales of kitchen cabinets and bathroom vanities through the first five months of 2009 are down 33% compared to the same period last year. Similarly, the Association of Home Appliance Manufacturers (AHAM) reports that domestic shipments of major home appliances through the first six months are off 19.3% from a year ago.
Clearly, the industry is hurting. Clearly, more needs to be done. Legislation like the HIRE Act can do nothing but help.
By creating tax incentives for prospective remodeling consumers, the bill could well encourage spending for building products and home furnishings that would otherwise be deferred. It could also potentially help stimulate the manufacturing of building products, save jobs, generate revenue and increase home values at a time when the economy needs it most.
Similar tax incentives are seemingly working in the housing sector, where an $8,000 federal tax credit for first-time home buyers is said to be spurring recent gains in new construction.
The HIRE Act could do the same for remodeling.
A coalition of associations representing cabinets, home furnishings and related interests is actively supporting passage of the proposed legislation.
Others in the kitchen and bath industry are strongly encouraged to add their voices to that effort.