The outlook for the $280 billion remodeling industry that the NAHB and the NAHB Research Center delivered at the International Builders’ Show Feb. 15 at first glance appears dreary, but a closer look reveals some bright spots.
Nationally, remodelers are dealing with clients who are nervous about the state of the economy and hesitant to part with cash they may need to rely on to get through difficult times. In addition, potential clients may be loathe to commit to larger projects that may not deliver returns in today’s soft real estate market. This fallout from the declining new-home construction segment is likely to continue until the economy starts to improve and consumers once again become more confident in the value of their homes.
The decline in remodeling spending that pros began to report mid-2007 most affects higher-end remodeling, according to Kermit Baker, director of the Harvard University Joint Center for Housing’s Remodeling Futures Program. Homeowners see better value in moderately priced remodeling projects, he says. Baker predicts that modest declines will continue through 2008. To more comfortably survive this period before the hoped-for economic turnaround, remodelers may need to jump on jobs they wouldn’t have considered during more flush times.
However, the NAHB Research Center’s current projections for the next 10-year period predict a steady increase in remodeling spending through 2016 totaling $369.3 billion, after a flat period lasting through 2008.
In particular, demand for outdoor living spaces will experience tremendous growth, according to the Research Center’s study of designers architects, marketers, and builders, reports Gopal Ahuluwalia, vice president of research for NAHB’s economics group. Though not limited to the high end of the market, the demand for outdoor living spaces will be notably higher among upscale homeowners than among owners of average homes (below 2,000 square feet). The trend will spread around the country, rather than just in the sunniest regions.
Features such as decks, patios, rear and front porches, and patio covers and enclosures were by far the most common additions to outdoor living spaces in 2007. In the next 10 years, demand for outdoor kitchens, lighting, pools and spas, and outdoor audio/video equipment is expected to increase significantly, according to the study.
During the Remodeling Outlook session three remodelers from diverse markets talked about the current state of their own businesses, comparing their individual markets to the national perception of the remodeling industry’s health.
Alan Hanbury Jr., president of House of Hanbury Builders in Newington, Conn., reports that his phone has essentially stopped ringing; he’s receiving very few inquiries and has heard from fellow remodelers in his area that they’re experiencing the same problem. Hanbury thinks that people in his market have been scared by the generalized national reports of the housing industry’s poor health and are waiting until conditions improve before taking on remodeling projects, regardless of the real health of the local economy. He says his company now has to respond to requests for handyman-type jobs because no one is calling for any other services.
Conversely, Sherry Schwab of HCS Construction Services in Bellevue, Wash., says that the Seattle-area remodeling market is holding steady. Her company still is taking calls for large projects as well as smaller kitchen and bath remodels, she says. Though demand for remodeling services is still strong, it is not heavy. She also notes that clients are taking longer to sign contracts for work, particularly on big projects. Though the Seattle housing market is still healthy, her customers’ decisions are informed by the reports they read and hear about the weakening housing industry in general.
Similarly, Lonny Rutherford of Legacy Construction in Farmington, N.M., reports that the Southwest’s remodeling industry is doing well overall. Homeowners are still putting money into their homes, but many have grown hesitant about committing to projects that may have less resale value in today’s market. Considering New Mexico’s climate, it’s not surprising that outdoor living areas are on the upswing in his area, Rutherford adds.
Remodeler Mike Nagel of Rosell, Ill.-based RemodelOne Inc. reports that large-volume remodelers in the Chicago area are struggling because there’s not enough demand, although his own company is doing very well because of its customer base and still-functioning referral system. He points out that in the past six months, three customers have expressed interest in green remodeling, extending past products that are more environmentally friendly in application to also focus on how those products are produced and whether manufacturers’ processes are environmentally friendly and sustainable.
The other remodelers on the panel say that their clients have been requesting energy-efficient upgrades for years, so they are not necessarily noticing increased requests for green remodeling. However, they do note that homeowners have become more aware of green as a total approach, rather than just the energy-efficiency aspect.
