ORLANDO, FL -Homeowners with incomes over $120,000, and those living in homes costing $400,000 or more, are emerging as "one of the anchors" of the nation's remodeling industry, according to a leading housing industry authority.
Speaking at the recent International Builders' Show, William Apgar, a senior scholar at the Harvard University Joint Center for Housing Studies, told convention-goers that "Generation Xers" – which comprises those people who were born between the years 1964 and 1975 – are shaping up as a new market force, while those with the highest incomes are joining with affluent baby boomers and seniors to fuel growth in the top end of the remodeling sector.
According to a new study released by the Joint Center, the number of homeowners with inflation-adjusted incomes exceeding $120,000 soared by 50% from 1995 to 2003, and those people spent more than $43 billion on remodeling in 2003, 31% of the total $138.1 billion spent for the year on home improvements.
Although the high-income group accounted for only 30% of total U.S. household growth during that period, they were responsible for 61% of the inflation-adjusted increase in improvements by homeowners, the report concluded. In sharp contrast, households with incomes below $80,000 accounted for 41% of household growth but only a slight 3% of the increase in home improvement spending.
Apgar added that homes topping $400,000 accounted for only 11% of the housing stock in 2003 – or 8 million units – but were responsible for 30% of home improvement expenditures. Owners of these homes fueled over 90% of the growth in improvement spending between 1995 and 2003, he said, with owners in this group increasing their remodeling expenditures from $8 billion to more than $40 billion.
Owners of the high-end homes, Apgar said, completed more than 800,000 room additions in 2002-2003, which accounted for 43% of total spending in this category. The group also accounted for one-third of the total spending done on the remodeling of kitchens and baths.
Of the more than $40 billion spent on improvements in high-value homes in 2003, $34.1 billion of the work was done by professional contractors, according to the Harvard report, leaving only 15% in the hands of do-it-yourselfers. By comparison, among owners with homes valued at less than $100,000, one-third of improvements were do-it-yourself jobs.
Baby boomers, who are now moving steadily into their 50s, still dominate the remodeling market and accounted for 52% of total improvement spending in 2003, Apgar observed, "but Generation X is starting to come on strong, growing rapidly in homeownership" and accounting for 28% of remodeling expenditures done in 2003.
The 30-somethings who comprise the Generation X group are already spending as much on remodeling as the baby boomers spent when they were at the same age, Apgar noted, with total household outlays averaging $2,200 in 2003.
However, when it comes to remodeling, Gen Xers are more likely to do the work themselves, he said. In 2003, D-I-Y accounted for 41% of the younger generation's spending on overall home improvements, compared to a 26% share for the baby boom generation.
Older households, Apgar added, may spend less on improvements as they age and find themselves living alone or in an empty nest and not needing additional space, but their use of professional remodelers increases.