What’s the outlook for the remodeling industry? What trends are worth watching? We have our own opinions but thought it would be interesting to hear from a third-party expert.
Kermit Baker is a senior research fellow at the Joint Center for Housing Studies of Harvard University. He is also the project director of the organization’s Remodeling Futures Program, which studies “factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States.”
Through comprehensive reports such as America’s Housing — Emerging Trends in the Remodeling Market [http://www.jchs.harvard.edu/research/improving-americas-housing], the Joint Center provides practical, forward-looking perspective on the evolution of the remodeling industry.
How does the state of the economy affect the remodeling industry?
Basically, there’s a direct relationship between the two. When the economy is strong, people have more income and housing prices increase. As a result, homeowners are more likely to invest in their home. But even during economic downturns, we still see activity in the remodeling industry — it’s generally thought to be less cyclical than the new-construction industry.
What interesting trends are we seeing in the industry regionally?
Emerging Trends in the Remodeling Market [http://www.jchs.harvard.edu/research/improving-americas-housing ] is a national report, but many of the findings certainly apply to New England. I’ll highlight four trends in particular:
One, investment in rental stocks: Rentals are usually owner-occupied homes. But with the many foreclosures and related factors, we’ve seen some weakness on the homeowner side and strength on the rental side. New England has older rental stock, and more money is going into renovating older rental units.
Two, aging-in-place retrofits: Aging baby boomers are thinking about staying in their current home for the foreseeable future. This can be challenging because they may have bought the home when they were in their 30s, and it wasn’t designed for someone in their 70s or 80s. New England’s older housing stock — steep steps, narrow passageways, small bathrooms — usually isn’t accommodating for older people. Retrofits can make it easier to live in your home as you age.
Three, sustainable home improvement: The emergence of energy-efficiency retrofits spurred some tangential niche markets that are just starting to take off. For example:
- Healthy-home retrofits — people are much more concerned about things like VOC paints, mold, radon, natural ventilation and natural lighting.
- Water conservation — through more efficient appliances.
- Use of rapidly renewable products and recycled or reused materials — this is a big growth area in New England.
- Alternative energy sources, like solar, wind and geothermal.
- Home automation — having a more technologically sophisticated home.
Four, do-it-yourself remodeling: Spending on DIY home improvement projects eased off for much of the last decade, but has picked up again in the last year or two. Why? A new wave of millennials is entering the market, and they’re more likely to do DIY projects. The same goes for immigrants and certain racial minorities.
Overall, there are many opportunities for growth in remodeling. However, large kitchen projects, bath projects and wing additions won’t be a big part of the industry moving forward. Those were the result of rising home appreciation during the housing boom. I think we’re going to see more mid-level projects instead. So remodelers will generally have a broader base made up of smaller-ticket projects.
What do the latest data show about the growth of the remodeling industry in the next few years?
Over the last 20 to 25 years, it looks like home improvement spending has increased about five percent on average, year over year. That’s about in line with how fast the economy has grown. We expect to see regular, routine growth of five percent, year over year, over the next three to five years. By the end of this year, we think the remodeling industry will be back to its market peak — that is, 2007 levels.