Qualified Remodeler Magazine

OCT 2018

Qualified Remodeler helps independent remodeling firms to survive, become more professional and more profitable by providing must-have business information, namely best business practices, new product information and timely design ideas.

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he research experts of the remodeling market—econ- omists from universities and associations, building product executives and others—gath- ered for two days last month to examine the outlook for remodeling and home improvement activity. It was the annual Home Improvement Research Institute (HIRI) sum- mit. Most attending agreed that remodeling activity will be very strong in 2019 and beyond. Beneath the surface, however, the industry's fundamentals are quite complex and changing. According to a newly released forecast from John Burns Real Estate Consulting (JBREC), the market is expected to top $372 billion in 2018 and rise to $393 billion by 2021. Similarly, the Joint Center for Housing Studies of Harvard University's Leading Indicator of Remodeling Activity (LIR A) shows strong growth through the end of 2019. 'ere are many contributing factors to this outlook: a strong economy, which grew at 4 percent this past summer; very low unemployment; high consumer con•dence; and real gains in wages. But there are complicating factors too. We are now in the longest business cycle in U.S. history. Next June it will be 10 years old, well past traditional cycles. 'e overall hous- ing market is not rebounding like it has over the past century. New construction building, for example, has not fully recovered and is lag- ging for a number of structural reasons: rising una˜ordability, a lack of housing in growing markets, and a decrease in housing mobility. So the question is not whether there will be a period of slower growth on the horizon. It is a question of when. One key to emerge in understanding the current market is the growing length of time Americans own their homes. People aren't mov- ing as much as they once did. Today, the mobil- ity rate—the average number of years between moves—stands at nearly 10 years, well above the 5.6-year average just a few decades ago. "Mobility is a bit of a puzzle," says Kermit Baker, who founded and manages Harvard's Remodeling Futures Program. "It's a more fundamental question: Why are we moving less? Historically, about 80 percent of moves have been for basically any housing location- al issues, and 20 percent are for long-term family or job issues. 'e second category has stabilized and is starting to head up again. 'ese are people moving from Chicago to Los Angeles to take a new job. 'at seems to be about as common as it used to be. It's within metro areas, or even within neighbor- hoods and communities, where moves are less frequent. 'is would be someone who moves from a 1,500-square-foot house to a 2,500-square-foot house, or who wants to move for better schools." Recent statistics report prices for homes have risen steadily as have mortgage interest rates. And according to Baker, the result is a very high premium for the luxury of moving to another home—something peo- ple did frequently in past decades. 'e re- sult: People are staying in homes longer, and THE NEW REALITY OF LESS MOBILITY Economists and housing experts say the outlook for remodeling activity remains strong. But the fundamentals bear further examination as more homeowners are staying put longer. By Patrick L. O'Toole T they are making investments in them. Some are discretionary projects like new kitchens and baths. Others fall into the repair and replacement category—energy-e§cient win- dows, a new HVAC system or •ber cement siding, among many other project types. For industry researchers, it also means that existing-home sales •gures, which hit 7 million units nationally in 2007, is much less indicative of future remodeling activity than it once was. Its usefulness as a gauge AVERAGE NUMBER OF YEARS BETWEEN MOVES Americans are staying in their homes longer, and the implications for remodelers are significant. It's driving more home activity. Source: JBREC tabulation of Census CPS Survey 10 9 8 7 6 5 4 3 2 1 0 1980's 5.6 6.0 7.3 9.1 1990's 2000's Today EXCLUSIVE REPORT: Remodeling Market Outlook 22 October 2018 QR QualifiedRemodeler.com

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