Although the weakest part of the housing industry is notably single family home construction, home remodelers can look forward to a positive year. After rising just 3.5% last year, to an impressive $107.4 billion, homeowner spending on remodeling projects is expected to increase 12% in 2012 in addition to 8% in 2013, says a recent forecast by the National Association of Home Builders and Harvard University’s Joint Center for Housing Studies
A large deficit in that total is spending by investors buying dilapidated properties and fixing them up either to resell or to turn into rental units. Add that in and the total spent was closer to $300 billion last year and is still expected to increase
By The Numbers
Where is all of the money coming from? Credit the anticipated spending to the same factors that have helped weigh down the housing market. The percentage of people who moved from one home to another in 2011, 11.6%, was at its lowest since the Census Bureau began tracking mobility in 1948. Since home values are on the decline, 26% of homeowners plan to stay in their homes at least 16 more years, and an additional 23% said they plan to stay put 6 to 10 years, says a recent poll by the National Institute of the Remodeling Industry. Homeowners in areas where the local housing market has hit an all time low may be more willing to invest in their properties again. That means these old houses can look forward to a complete make-over in the not so distant future
For those who bought foreclosed or homes sold through short sales typically spend an average of $7,300 during the first year of homeownership in improvements and repairs, according to the 2011 survey. Even homeowners with equity in their homes may decide that, in the current market, trying to sell their home isn't worth the money, so they will instead tailor the home to their changing lifestyle and needs
"The mix is going to change," said Kermit Baker, a senior research fellow at Harvard's Joint Center for Housing Studies. "It's not going to be driven by these upper-end projects. It's going to be driven by these smaller-scale activities and it's been deferred. There's a lot of folks who are not underwater or not that significantly underwater and aren't planning on moving anytime soon."
While this news might dismay some would-be home buyers looking to get into a certain neighborhood, as well as home building and construction companies, it surely comes as a pleasure to remodeling industries. Last year, the five most common remodeling jobs were bathrooms, kitchens, window and door replacement, repairing property damage and whole-house remodeling
"Remodeling is not driven by price appreciation or preparation for sale, by a lot of the things you'd normally thought of, but rather by simply good old-fashioned 'This is what I want. I want a place that is newer, has all the gizmos and is nicer to live in,'" said David Crowe, chief economist for the National Association of Home Builders. "It's a return to the real value of a home as a place that I will use rather than trying to gain appreciation."
Baker says that he believes much of the remodeling industry's growth will come from changes made to homes to allow baby boomers to age in place. "That's going to be one of the really strong markets over the next decade," Baker said. "I'm really not sure the remodeling industry knows how to sell that population really well."