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Remodeling Market Trends and Update Trends and Update
Kermit Baker
Remodeling Futures Conference Remodeling Futures Conference April 5, 2011
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Remodeling Market Trends
1. Homeowners generally familiar with federal energy-efficiency tax credit program, and many undertook projects because it was available.
2. Distressed properties remain important source of new projects for remodeling contractors.
3. Weather created slowdown in remodeling activity in first quarter, although discretionary projects and pro q , g y p j pprojects remained fairly healthy.
4. LIRA sending mixed signals for 2011 remodeling 4. LIRA sending mixed signals for 2011 remodeling outlook; volatility likely to continue.
5 Home sales picking up in Sunbelt; prices holding up
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
5. Home sales picking up in Sunbelt; prices holding up better in Frostbelt
Homeowners Were Widely Aware of the Expanded Energy-Efficiency Tax Credit Program
Please indicate which of the following best describes your awareness and participation in the federal energy-efficiency tax credit program
Not aware, 18%Aware, and
have done project(s),
25%
Aware, but have not
done projects 57%
Note: Survey of 723 respondents. Federal energy-efficiency tax credit program are for projects such as insulation, high
projects, 57%
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Survey of 723 respondents. Federal energy efficiency tax credit program are for projects such as insulation, high efficiency windows, and heating and air conditioning upgrades.Source: Synovate survey, 2011.
Still, Without Tax Credit Incentives, Many Indicate That They Still Would Have Undertaken Project
How important was the federal tax credit in your decision to undertake an energy-efficiency home improvement?
Not very
Very important (wouldn't have
done the project without it), 23%
important (probably would
have done project without it), 40%
Somewhat important (helped
Note: Survey of 184 respondents who had answered in a previous question that they were aware of the federal tax credit
important (helped sway decision to
undertake the project), 37%
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Survey of 184 respondents who had answered in a previous question that they were aware of the federal tax credit program and had done one or more eligible projects.Source: Synovate survey, 2011.
For Remodelers Working on Distressed Properties Over Past Year, Projects Averaged 20% of Revenue
Work on distressed homes as share of project revenue over the past year, % of firms
50% or more10%
under 10%37%
25% to 50%12%
37%
10% to 25%41%
average = 19.6% of total revenue
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: responses for the 83 respondents (35%) that had worked on distressed properties over the past yearSource: JCHS National Green Remodeling Survey, February, 2011.
The Share of Project Activity on Distressed Homes was Highest in the West
Work on distressed homes as share of project revenue over the past year, averages for firms by region
25%
15 7% 16 0%
21.9% 22.4%
19.6%20%
25%
15.7% 16.0%
10%
15%
5%
0%
Northeast South Midwest West US
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Source: JCHS National Green Remodeling Survey, February, 2011.
Purchasers Were the Most Common Client for Remodelers Working on Distressed Properties
Remodeler clients when working on distressed properties (multiple responses permitted)
72%
60%
80%
2 %
40%
24%27%
6%
20%
0%
Purchaser Seller Bank Other
Source: JCHS National Green Remodeling Survey February 2011
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Source: JCHS National Green Remodeling Survey, February, 2011.
Employment At Residential Remodeling Companies Finally StabilizingCompanies Finally Stabilizing
Number of employees (000s, not seasonally adjusted)
% change from same quarter year ago
309.0314.8
30%
40%
325
350
294.1
309.0305.2
282.9288.9 289.5
275.11.0% 1.3%
2 9% -0 6% 0.5%
10%
20%
275
300
247.4 247.8253.8
243.4
220.2
235.7244.5 241.8
223.1
-2.9%-4.7% -3.8%
-6.5% -8.0% -9.9%-12.5% -14.2%-12.3%
-11.5%-11.0%
-4.9%-3.7%
-0.6%
20%
-10%
0%
225
250
-30%
-20%
200
5
2007-1 3 4 2008-1 2 3 4 2009-1 2 3 4 2010-1 2 3 4 2011-1(e)
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Source: U.S. Department of Labor.
Remodeling Contractors Failure Rates Were Very High Even When Market Was StrongVery High Even When Market Was Strong
Cumulative change in remodeling contractors in existence in 2003 over following four years
-11.2%
-10%
0%
-18.9%
-26.4%
-32.6%
-20.3%
-30%
-20%
32.6%-36.0%
-46.0%
53 6%
-50%
-40%
-53.6%-60%
2004 2005 2006 2007
Established Firms 2003 Start-ups
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Source: Statistics of U.S. Businesses, Business Information Tracking Series (BITS).
Tracking Recent Home Improvement Trends: NPD/HIRI Monthly Consumer Sentiment IndexNPD/HIRI Monthly Consumer Sentiment Index
National monthly survey of about 9,000 homeowners on home improvement plans;homeowners on home improvement plans;
Number of planned projects, estimated cost, p p j , ,DIY/pro installation, and expected financing information collected;
Over 150 home improvement, maintenance and repair, and lawn and garden categories covered
h th i each month in survey;
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
After Healthy End to 2010, Planned Spending Falls Off in Early 2011Three month moving averages compared to year-ago level for number of owners, number of planned projects, and planned spending
6.6% 7.1%10%
-1.4%
3.3%
5.0%
-0.5%
-3.6%-2.3% -2.6%
-3.3%
4.2%
1.5%
-1.6% -3.7%
0%
5%
-12.6%
-7.6%-8.1%
-10.2%-10.4%-8.9%
3.6%-1.5%
3.7%
-10%
-5%
-14.4%-15.9%
-14.2%
-20%
-15%
Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; February 2011 estimate based on January and February data only.
b l f h h ’ hl k d
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Source: JCHS tabulations of the Home Improvement Research Institute’s monthly Consumer Sentiment Tracking Study, Feb. 2008 – Feb. 2011.
Replacement Projects Creating Most of the Volatility in Planned Spending Three month moving averages compared to year-ago level for spending for planned home improvement projects by project type
15%
20%
5%
10%
15%
-10%
-5%
0%
-20%
-15%
Kitchen & bath, outside attachments, interior, other room additions & alterations
Exterior, systems & equipment
All Projects
Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses;
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Monthly figures are 3 month moving averages centered on reported month and normalized per 100,000 responses; February 2011 estimate based on January and February data only.Source: JCHS tabulations of the Home Improvement Research Institute’s monthly Consumer Sentiment Tracking Study, Feb. 2008 – Feb. 2011.
With Planned Spending Strong for Seniors and for Replacements, Pro Projects Pace Growth jThree month moving averages compared to year-ago level for spending for planned home improvement projects
20%
5%
10%
15%
-10%
-5%
0%
-25%
-20%
-15%
-25%
Pro DIY Total (Pro & DIY)
Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses;
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Monthly figures are 3 month moving averages centered on reported month and normalized per 100,000 responses; February 2011 estimate based on January and February data only.Source: JCHS tabulations of the Home Improvement Research Institute’s monthly Consumer Sentiment Tracking Study, Feb. 2008 – Feb. 2011.
Planned Spending by Owners in Northeast and Midwest Outpacing Sunbelt Locations
Three month moving averages compared to year-ago level for planned home improvement projects
40%
20%
30%
-10%
0%
10%
-30%
-20%
-10%
Northeast Midwest South West All
Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses;
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Monthly figures are 3 month moving averages centered on reported month and normalized per 100,000 responses; February 2011 estimate based on January and February data only.Source: JCHS tabulations of the Home Improvement Research Institute’s monthly Consumer Sentiment Tracking Study, Feb. 2008 – Feb. 2011.
Cash Has Been Funding a Growing Share of the Home Improvement Market
Spending by source of funds category for planned home improvement projects
Gifts & Other
No answer7%
Loans13%
Gifts & Other8%
3%
Cash & Own Funds72%
Note: Monthly figure of spending is normalized per 100,000 responses.
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Monthly figure of spending is normalized per 100,000 responses.Source: JCHS tabulations of the Home Improvement Research Institute’s monthly Consumer Sentiment Tracking Study, February, 2011.
Leading Indicator of Remodeling Activity Shows Unusual Volatility Through 2011 (preliminary)
Homeowner ImprovementsFour-Quarter Moving TotalsBillions of $
Four-Quarter MovingRate of Change
20%$140
$132.2
$125 7
$130.2
1 8%3.2% 2.8%
7.1%
10.3%
6.3% 10%
20%
$130
$140
$125.7
$120.9 $120.1$118.2
$115.8 $114.6
$118.0$115.9 $115.2
$122.7 $123.3
$115.0
-7.9% -7.1% -6.7%
-3.0%
1.8% -0.2%
-10%
0%
$120
$112.3 $112.0-9.3%
-14.0%-16.1%
-13.6%-10.6%
-20%$110
-30%$1002008-1 2 3 4 2009-1 2 3 4 2010-1 2 3 4 2011-1 2 3 4
US Census Bureau LIRA
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Source: Joint Center for Housing Studies.
Many Distressed Markets Beginning to See an Increase in Sales of Existing Homes
Change in home sales, year over year, Q4 2009 – Q4 2010
10 metros with largest increase
10 metros with largest decrease
National average = -19.2%
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Metros mapped are of the 50 largest by population for which data is available.Source: Zillow.com
House Prices Beginning to Recover in Key Northeast, Texas, and California Markets
Change in house price index, year over year, Dec 2009 – Dec 2010
10 metros with largest increaselargest increase
10 metros with largest decrease
National average = -5.5%
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Metros mapped are of the 45 largest for which data is available.Source: CoreLogic House Price Index, 2010.
Metro Areas With Recovering House Prices Generally Seeing Fewer Homeowners Underwater
Negative equity share, Q4 2010
10 metros with 10 metros with smallest share
10 metros with largest share
National average = 23.8%
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
Note: Metros mapped are of the 50 largest metro areas and divisions that have 50,000 or more loans.Source: CoreLogic Negative Equity Report, 2010.
Remodeling Outlook
1. Year getting off to a rough start; bad weather and expiration of higher-level energy-efficiency tax credit seem to be major culprits seem to be major culprits.
2. Rehabilitating distressed properties looks to be i t t f k t th i b ilt important source of market growth in overbuilt areas.
3. Discretionary project activity picking up across the board, although heavy reliance on cash funding limiting project size.
4. Home sales beginning to pick up in distressed markets, although prices holding up better in Northeast and Texas markets.
JOINT CENTER FOR HOUSING STUDIESGraduate School of Design | Harvard Kennedy School
Harvard University
Copyright 2011
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