Tighter credit standards and falling consumer confidence are expected to depress remodeling spending through 2008 according to Harvard’s Joint Center for Housing Studies. The Leading Indicator for Remodeling Activity (LIRA) reports that homeowner spending for home improvement activity will continue to decline, falling by an annual rate of 2.6 percent through the third quarter of 2008.
“Fewer home sales and falling home prices are dampening interest in spending on home improvements,” notes Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “While remodeling expenditures are likely to continue to slump in 2008, there will remain a need for basic home improvements for an aging housing stock.”
“An expanding economy has helped cushion the remodeling market,” remarks Kermit Baker, director of the Remodeling Futures Program of the Joint Center. “Absent a more serious national downturn, remodeling activity is expected to see only modest declines in 2008.”
The LIRA is a new initiative from the Remodeling Futures Program to estimate future national remodeling activity with a horizon of three quarters. The LIRA replaces the Remodeling Activity Indicator (RAI) previously released by the Joint Center. The LIRA is released quarterly (April, July, October and January) by the Joint Center’s Remodeling Futures Program during the third week after each quarter’s closing. The next release date is April 17, 2008.
Business RelationshipsWindow Company Resigns from BBB
One of the nation’s largest window replacement companies has announced its intention to resign its membership in the Better Business Bureau of Northwest North Carolina and has urged its licensees to discontinue their membership with their local BBBs.
The action by Window World Inc. comes as the result of an apparently ongoing disagreement with the BBB over a number of issues, notably Window World’s national slogan, “Simply the Best for Less,” according to Window World CEO Todd Whitworth.
In a letter to the company’s 195 nationwide licensees, Window World Vice President Dana Deem, stressed that the decision was not a hasty one, but said that over a period of months the BBB had taken issue with Window World’s product positioning, and company slogan.
Those licensees may be members of any one 128 local, independent Better Business Bureaus. Window World, as a national franchisor, is a member of the BBB in the Wilkesboro, N.C., area in which the window company is head-quartered.
According to a spokesperson from the Council of Better Business Bureaus (CBBB), depending on the relationship established when a company joined a local BBB, a ruling by that local BBB on a complaint against a franchisor such as Window World may not be applicable to a franchisee who is a an independent member of a different, independent BBB.
In a letter to David Dalrymple, president of the Northwest North Carolina BBB, Whitworth contended that competing firms were not censured for the same practices for which Window World came under fire.
Whitworth promised that despite severing ties with the Better Business Bureau, his company would continue to address and remedy any complaints received by the BBB.
Dalrymple was reluctant to discuss specifics of the dispute but told Qualified Remodeler at press time that Window World was a BBB member in good standing and that he had not received word of the firm’s resignation. The BBB Web site report on Window World listed one advertising complaint and stated that the “company made every reasonable effort to resolve” that complaint.
Last year, Eastman Kodak, one of the founding members of the Council of Better Business Bureaus (CBBB), resigned from that group, which is described as “the national umbrella organization for the North American system of Better Business Bureaus. Kodak apparently faced expulsion arising from a dispute with BBB of Upstate New York, the BBB that covers businesses in Kodak’s Rochester, N.Y., headquarters city.
Existing Home SalesForecast: Holding Pattern Followed by Improvement
Existing-home sales are expected to hold fairly steady in early 2008 as indicated by pending sales activity, then rise later in the year and continue to improve in 2009, according to the latest forecast by the National Association of Realtors (NAR).
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 2.6 percent to a reading of 87.6 from a strong upward revision of 89.9 in October, but remains above the August and September readings and indicates a broad stabilization. The index was 19.2 percent below the November 2006 level of 108.4.
The PHSI in the South rose 2.3 percent in November to 100.7 but is 19.8 percent below a year ago. In the West, the index slipped 2.1 percent to 86.6 but is 18.5 percent lower than November 2006. The index in the Midwest fell 4.1 percent in November to 82.1 and is 18.6 percent below a year ago. In the Northeast, the index dropped 13 percent in November to 70.1 from a spike in October, and is 19.1 percent below November 2006.
Existing-home sales for 2007 will probably total 5.66 million, the fifth highest on record, then edge up to 5.70 million this year and 5.91 million in 2009, compared with 6.48 million in 2006. Existing-home prices for 2007 are likely to be down 1.9 percent to a median of $217,600, hold even this year and then rise 3.1 percent in 2009 to $224,400.
“Rising home prices in the affordable midsection of the country are likely to offset declines in some of the previously hot markets,” Yun said.
There are wide variations in housing market conditions around the country, with nearly two-thirds of the metropolitan areas showing price gains. Healthy increases in metro prices are occurring in places such as Pittsburgh; Beaumont-Port Arthur, Texas; San Jose, Calif.; and Bismarck, N.D.
New Home IndexBuilder Confidence Virtually Unchanged In January
Builder confidence in the market for new single-family homes was virtually unchanged for a fourth consecutive month in January as mortgage-market problems and inventory issues continued to pose challenges, according to the NAHB/Wells Fargo Housing Market Index (HMI). The HMI rose a single point to 19 in January following a downwardly revised 18 reading in December and 19 readings in both October and November of 2007.
“The HMI has held within a narrow two-point range for the past five months, indicating that builder views of housing market conditions essentially haven’t changed over that time,” said NAHB Chief Economist David Seiders. “Builders are anticipating a time when market conditions will support an upswing in building activity – most likely in the second half of 2008.”
Improvements BenchmarkC-50 Report Continued for 2008
The U.S. Census Bureau recently announced that it will be continuing its Expenditure for Residential Improvements and Repairs report (C-50) for calendar 2008. There had been concern among industry analysts that the Census Bureau would discontinue the report, which serves as a benchmark for related industry indicators.
The C-50 report details quarterly expenditures for maintenance and repairs, additions and alterations, as well as major replacements, for residential properties, with breakdowns from owner-occupied properties, owner-occupied one-unit properties, and rental properties.
Home SalesMortgage Bankers See Decline
The Mortgage Bankers Association (MBA) projects that economic growth will continue to slow through the first half of 2008, but expects economic activity will begin to pick up in the second half of 2008 and resume trend-like growth toward the end of 2009.
The association predicts that existing home sales for 2008 will decline by about 13 percent from 2007 to 4.94 million units. Sales will pick up by about four percent in 2009.
In addition, median home prices for new and existing homes are expected to decline in 2008, with nominal median prices falling about two percent. Prices should increase by between one and two percent in 2009, according to the MBA.
New home sales will decline by about 15 percent in 2008 from 2007 to 666,000 units. The MBA expects sales to increase about seven percent in 2009.