Volume 47, Issue 7 - July 2012
Economist and Retailers Predict Improvement
for Residential Retrofits
Industry experts say the residential retrofit market is still doing well. Approximately $300 billion was spent last year on home improvements, according to Kermit Baker, a senior research fellow at Harvard University’s Joint Center for Housing Studies, and the project director of the Remodeling Futures Program.
Despite challenges in the housing market, the downturn has not been nearly as serious for residential retrofit spending (the market size is still close to $300 billion); and green remodeling and rehabbing distressed properties offers opportunities for home improvement activity.
“The most [distinctive] characteristic has been the movement in house prices,” said Baker, noting there was a big drop between 2006 and 2009.He also noted that house prices have just bounced along the bottom since. Distressed inventory has also been holding back prices for many homes in the country. According to Baker, retrofit improvements have contributed to growing the share of residential investments since the downturn. Though it dipped low in 2005, it has been climbing ever since, to almost 70 percent in 2009.
The NAHB reported that bathroom projects now top kitchens as being the number-one remodeling job for instance—an observation that holds true for Ray Adams, president of Coastal Industries in Jacksonville, Fla. His company offers shower enclosures to retailers who work with both commercial and residential clients.
“More of our customers are focusing or have been focusing over the past few years on remodeling jobs,” Adams says. “Most homeowners, when they’re looking for a shower door nowadays, they’re looking for heavy-glass shower doors. I think that’s become an upgrade of choice.”
Others, such as Laura Barefoot of Barefoot and Co. Inc., a supplier of specialty products to the building industry in Charlotte, N.C., agree the remodeling market is growing. “A lot of people flinched to it when they weren’t buying new houses but people are still doing it,” Barefoot says. “We’ve seen a lot of screened-in porches being turned into closed-in rooms, where they’re adding windows and storm doors.”
Barefoot also says there have been a lot of bathroom upgrades recently compared to a year or two ago.
“We are getting call after call for frameless showers,” she says. “We do a number of frameless showers every single day. I know that has always been popular but I think more people now have more money to start their remodeling process if they weren’t able to do it a year or two ago.”
Additionally, energy efficiency retrofits are a big market. Baker said remodeling contractors report that a quarter of their revenue comes from energy-efficient requests from homeowners. He said newer homes use 30 percent less energy per square foot than homes built in the early 1970s. “Energy-efficient programs need to focus on older homes to be effective,” he noted.
However, even though some conditions are improving, there are still challenges. Baker estimated that about a million homes sold last year were foreclosures and reported that total spending on distressed properties was an estimated $8.5 billion last year.
However, things do seem to be looking up. As Baker noted, the Leading Indicator of Remodeling Activity points to a healthy upturn in the second half of the year.
“It looks like we’re moving in the right direction and will see better numbers as we move into the second half of the year,” said Baker.