The Affluent are Still Spending

Remodelers in some markets are reporting softness in new business. In this issue, our “On Your Business” columnist Mike Weiss highlights this reality and suggests that this fact can be turned into a positive.

Weiss rightly points out that the fat, go-go days of the early and mid ’00s are behind us and it is time for owners and managers to look under the hood and examine their companies, searching for ways to improve in what remains a pretty solid remodeling environment overall. We need to bear in mind that growth in remodeling has slowed in some areas, but many parts of the country are experiencing higher remodeling demand. In addition, regardless of market conditions, there is plenty of evidence that remodeling activity remains strong and way above average among affluent Americans.

Case-in-point is a biennial survey conducted by researchers at The American Affluence Research Center. Their December report shows a positive uptick in remodeling purchase plans as well as vacation home building plans. On average, “the affluent” as defined by AARC are those with annual household incomes above $324,000, live in homes valued at $1.2 million, have a net worth of $3.3 million with investable assets of $1.3 million.

It is no secret that many remodeling contractors succeed purely on the basis of their innate ability to gain the confidence of affluent prospects who are, by definition, more insulated against economic cycles. They buy what they want, when they want it. So, when Weiss suggests that now is a good time for owners and managers to look under the hood and tune things up, one of the questions that should also be asked is: What is our closing ratio with well-heeled prospects? If you are not performing as well as you like, steps can be taken to do the things the affluent have come to expect in all of their transactions — good service, attention to detail and timeliness.

For the past two years, QR, with our partner, has been asking remodeling consumers about their experiences, gauging their level of satisfaction with their remodelers. The results are clear. It is not about price. It is about completing the job on time. It is about caring for their property by keeping the jobsite clean each day. And it is about clear and consistent communication. All customers want these things, particularly the affluent.

In addition to a demographic audit, remodelers might also do well to remember that $10 trillion of generational wealth is slowly shifting from the Greatest Generation to the Boomer Generation through their estates. Your antennae should also remain tuned to the lifestyles of the formerly strapped and newly comfortable. A slower growing remodeling market is not necessarily a bad remodeling market.