Remodeling Market Trends and Update Kermit Baker Remodeling Futures Conference November 9, 2010
Remodeling Market Trends 1. Remodeling spending saw significant decline during recession; greatest fall-off for upper-end discretionary projects, and least for replacements. 2. DIY project share has been trending down for past several years. 3. Industry slowdown has produced less concentration in spending. 4. Recent figures point to more balanced spending, with industry apparently poised for healthy recovery.
Boom in Home Improvement Spending As Well as Recent Downturn Driven by Owner Projects Spending on home improvements by tenure of unit; index: 1995 = 100 300 250 Total Owner units Rental units 200 150 100 50 1995 1997 1999 2001 2003 2005 2007 2009(p) Source: Joint Center tabulations of 1995-2009 AHS.
Decline in Remodeling Spending This Cycle Greater for Discretionary Project Categories Spending by owners, billions of $ $50 $40 $47.0 $47.4 2007 2009 $41.3 $38.5 $37.2 $36.3 $39.6 $30 $29.1 $27.8 $27.4 $25.3 $20 $19.8 $10 $0 Kitchen & bath Other adds/alts Interior replace. Systems upgrades Exterior replace. Other Source: JCHS tabulations of 2007 and 2009 AHS.
During Downturn, Spending Held Up Better for Lower Income, Older Owners Percent change in spending for homeowner improvements, 2007-2009 0% -10% -20% -30% 2009 Household income Age of head of HH -40% under $40K $40 - $80K $80 - $120K $120K + under 35 34-44 45-54 55-64 65 + U.S. total Source: JCHS tabulations of 2007-2009 AHS.
DIY Share Hasn t Improved During Periods of Weaker Growth or Declines DIY share of total improvement spending by homeowners 35% 30% 26.8% 25% 23.8% 25.0% 23.8% 23.8% 22.3% 21.5% 20.7% 20% 15% 1995 1997 1999 2001 2003 2005 2007 2009(p) Source: JCHS tabulations of 1995-2009 AHS.
Determinants for DIY Spending -Economic conditions - Age composition of remodeling households - Income of remodeling households -Project mix
DIY Share of Project Spending Higher for Discretionary Projects DIY share of spending by category, 1995-2009 averages 40% 30% 30.1% 30.9% 27.1% 23.7% 24.7% 23.5% 20% 18.4% 17.6% 10% 0% Kitchen Bath Other room adds/alts Systems Exterior repl. Interior repl. Property imp. All proj. Source: JCHS tabulations of the 1995-2009 AHS.
Homeowner Improvement Spending Concentrated in Households Spending at Least $20,000 in 2008-2009 Share of spending for improvements by owner spending level, 2008-2009 under $5,000, 11.3% $50,000 or +, 32.8% $5,000-$10,000, $10 13.7% $10,000-$20,000, 18.1% $20,000-$50,000, 24.1% Homeowner improvements in 2009 = $189 Billion Source: JCHS tabulations of the 2009 AHS.
Periods of Strong Growth in Remodeling Activity Have Been Associated with Growing Share by Top Spenders Share of total market spending by top 5% of owners Source: JCHS tabulations of the 1995-2009 AHS.
Even Though the Share of Owners Reporting Projects Doesn t Move With Growth in Spending Share of total market spending by top 5% of spenders Percent of owners reporting projects 70% 32% Top 5% Share of Spending 60% 50% Share of Owners Reporting Projects 29.7% 54.7% 52.8% 51.0% 28.7% 28.7% 60.6% 56.8% 56.7% 28.9% 52.3% 30% 45.2% 28.4% 27.9% 28.1% 28% 40% 26.8% 30% 1995 1997 1999 2001 2003 2005 2007 2009(p) 26% Source: JCHS tabulations of the 1995-2009 AHS.
After Growing in the First Quarter, Planned Improvement Spending Has Eased Three month moving averages compared to year-ago for planned spending, homeowners 10% 5% 5.0% 3.3% 0% -1.4% -0.5% -1.5% -1.3% -5% -7.6% -8.1% -3.6% -2.3% -2.6% -3.3% -10% -15% -12.6% -10.2% -10.4% -14.4% -15.9% -8.9% -14.2% -20% Mar'09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan'10 Feb Mar Apr May Jun Jul Aug Sep (e) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August estimate based on July and August data only. Source: JCHS tabulations of the Home Improvement Research Institute s monthly Consumer Sentiment Tracking Study, Feb. 2008-Sep. 2010.
Planned Spending on Discretionary Projects Beginning to Strengthen Three month moving averages compared to year-ago level for spending for planned home improvement projects by project type 25% 20% 15% Kitchen & bath, Outside attachments, Interior, Other room additions & alterations ti Exterior repl., Systems upgrades All Projects 10% 5% 0% -5% -10% -15% -20% Mar'09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan'10 Feb Mar Apr May Jun Jul Aug Sep(e) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August estimate based on August and September data only. Source: JCHS tabulations of the Home Improvement Research Institute s monthly Consumer Sentiment Tracking Study, Feb. 2008-Sep. 2010.
Professional Installation Now Leading Market Recovery Three month moving averages compared to year-ago level for spending for planned home improvement projects 10% 5% Pro DIY All Projects 0% -5% -10% -15% -20% Mar'09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan'10 Feb Mar Apr May Jun Jul Aug Sep (e) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August estimate based on July and August data only. Source: JCHS tabulations of the Home Improvement Research Institute s monthly Consumer Sentiment Tracking Study, Feb. 2008-Sep. 2010.
Without Extension of Energy Tax Credits, Spending on Energy-Sensitive Projects Likely to Underperform Overall Market Two-year change in spending by homeowners 50% 40% 30% Total Improvement Spending Energy-Sensitive Proj. 20% 10% 0% -10% -20% 2001-03 2003-05 2005-07 2007-09(p) Source: Joint Center tabulations of 2001-2009 AHS
Over a Third of Remodeling Firms Have Worked on Distressed Properties Over Past Year Percent of remodeling firms working on homes over past year where owner defaulted or bank foreclosed 50% 46% 40% 37% 41% 35% 30% 20% 18% 10% 0% Northeast Midwest South West U.S. total Source: JCHS National Green Remodeling Survey, August, 2010.
Leading Indicator of Remodeling Activity Points to Growth Resuming by Year-End Homeowner Improvements Four-Quarter Moving Totals Billions of $ Four-Quarter Moving Rate-of-Change $160 40% $150 $144.2 US Census Spending Estimates LIRA projections 30% $140 $139.1 11.8% 12.8% 20% $132.2 $132.8 10% $130 $120 $110-0.1% -4.0% -9.3% $120.9 $125.7 $120.1 $118.2-10.6% -14.0% -13.6% -16.1% $115.8-7.9% -7.1% -6.7% $112.3 $112.0-3.0% $114.6 3.1% 1.6% -0.1% $117.7 $115.5 $112.2 $128.2 0% -10% -20% $100 3 4 2008-1 2 3 4 2009-1 2 3 4 2010-1 2 3 4 2011-1 2-30% Note: Preliminary estimate as of 9-28-10. Source: Joint Center for Housing Studies.