Report Paints Positive Picture for Remodeling
That is one of several key conclusions spelled out in a research report that details major remodeling trends among nearly 70 million U.S. homeowners.
The research report, entitled Remodeling Homes for Changing Households, was released last month by the Joint Center for Housing Studies of Harvard University. Funding and support for the report was provided by Masco Corp. Additional support was provided by several manufacturers and trade associations, including Elkay Mfg. Co., Moen, the National Association of Home Builders and the National Association of Realtors.
While new construction remains the most important way the nation's housing stock adjusts to changes in Americans' housing preferences, "the importance of remodeling is growing and promises to increase for at least the next decade," the Joint Center reports.
Since home-building levels have remained relatively stable for the past 20 years, new homes have accounted for a smaller share of the total housing stock, which approximates some 70 million units in all. For example, when construction activity peaked in the 1970s, new homes represented about 30% of the nation's total housing stock in any given year. That share declined to about 16% in the 1990s, and should fall to less than 14% over the next 10 years, the Joint Center reports.
"The impact of remodeling on what is often considered a static
housing stock is dramatic," the report observes.
Spending for home improvements rose by about $30 billion, or more than 4.5% per year from almost $150 billion to just under $180 billion between 1995 and 1999, according to the Joint Center report.
Among the other key conclusions of the report are the following:
- While a favorable economy has fueled growth in home improvement
spending, much of the spending strength can be attributed to the
10-million-unit increase in owner-occupied housing that took place
in the 1990s. In fact, the Joint Center notes, more than 26 million
homeowners reported undertaking more than 44 million separate home
improvement projects in 1999 alone.
- A large share of major improvement expenditures are for
kitchens, bathrooms, additions or interior alterations. These types
of projects accounted for over one-third of total homeowner
spending in 1999, and for 46% of expenditures among homeowners who
spent $10,000 or more on improvements that year.
- There are also certain key times for the homeowner when major
remodeling projects are likely to occur. New homeowners in
particular, tradeup buyers purchasing a resale tend to spend at the
time of purchase. Expenditures then tail off, and move up until the
home is 25-to-30-years-old (see Graph 2). That's when expenditures
typically spike, since they coincide with the time when major
systems need upgrading or replacement. Remodeling expenditures also
increase noticeably when homeowners add a household member, such as
a child, an elderly relative or a spouse, the Joint Center
- While do-it-yourself spending "has been relatively healthy" over recent years, the D-I-Y share of overall home improvement spending has been declining at the expense of professionally installed projects. Rising incomes, an aging population and a projected rise in the number of empty-nester and single-parent homes favor extra activity among professional contractors, the report states .
"As the economy continues to grow, the average age of the housing stock increases, and household incomes rise, spending on home improvements should remain healthy over the next decade," the report states, adding that the key forces supporting this outlook are "strong growth in the number of owner-occupied homes and the likelihood that average expenditures per home will increase.
"Spending levels obviously depend on a household's ability to afford home improvements, making future income a critical factor," the report continues. "Here again, the prospects remain favorable. Low unemployment rates and strong productivity growth have pushed up compensation levels.
"A continuation of these trends, coupled with the fact that many baby boomers will be in their peak income-earning years, means that homeowner incomes are likely to grow over the coming decade," the report concludes.