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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upgrades, and there's every indication that it is tracking to have an impact in the near term. e millennial generation is 82 million strong and oers the biggest potential op- portunity for the housing market—both new construction and remodeling, experts say. According to NAR's Yun, 1990 was the biggest birth year for millennials and, because of bad luck, they came out of college during the Great Recession, which has slowed their ability to form households and enter the hous- ing market. "If you see a 28 year old," Yun says, "give them a hug." Household formations are on the rise, and those younger cohorts will certainly help remodeling activity over the coming decade, experts say. UNCERTAINTIES AND NEGATIVES e remodeling market is also navigating its share of uncertainty and outright drags on demand and sales. What follows is a list of factors from JBREC's Tomalak, Harvard's Baker and NAR's Yun. Labor constraints e shortage of skilled labor has been ongoing for many years. Some at the HIRI conference estimated it would take a generation to work itself out. Short-term 'xes, like guest-worker programs, are not even on the table at this point. But it is estimated that the market Changing demographics Another factor that bodes well for remodeling in the coming years is the demographics of the country. Approximately 75 million baby boomers are retiring at a pace estimated to be 10,000 per day. is group is bene'ting from a strong stock market and a resurgence of home equity due to rising prices. And more than previous generations, they are tending to age- in-place and therefore invest in long-term up- grades. Harvard's Baker says the Remodeling Futures Steering Committee has been study- ing the coming phenomenon of accessibility follow is home equity line of credit with- drawals. Last year the new tax law mandated that all HELOC dollars were to be spent on home improvement in order to be deductable. JBREC expects a 5 percent increase in total HELOC balances in 2018, ending slow de- leveraging in revolving home loans since 2009. JBREC estimates that a 1 percent increase in HELOC lending per household drives an additional $133 million in big project remod- eling. In addition, each 1 percent increase in home equity increases the number of small project remodels by 1.2 percent. Sales will flatten in coming years, but owners are investing more and staying longer. ŅƚųÏåŸ×ƗljŏƁc±ƋĜŅĺ±ĬeŸŸŅÏĜ±ƋĜŅĺŅü)eXkŷØ John Burns Real Estate Consulting, LLC Big-project owner spending is currently driving the remodeling market forward, but the growth rate will slow in this sector. Smaller-project owner spending is projected to pick up the slack and keep the overall market at high levels of activity. (Note: includes labor and materials) Sources: John Burns Real Estate Consulting, LLC; U.S. Census, Harvard JCHS Note: Historical estimates since 2015 are produced using the LIRA model until American Housing Survey data became available. ŅƚųÏå×IŅĜĺƋåĺƋåųüŅųBŅƚŸĜĺčƋƚÚĜåŸ X)e%Fc:Fc%Fekk8)ak%)XFc:eFF¥Ɨljŏî}Ɨ U.S. EXISTING-HOME SALES BIG PROJECT REMODEL SPENDING Homeowner Improvements & Repairs Four-Quarter Moving Totals Billions of $ Four-Quarter Moving Rate of Change $450 $425 $400 $375 $350 $325 $300 $275 $250 $225 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Historical Estimates LIRA Projections 346.8 7.0% 6.9% 7.3% 7.4% 7.1% 6.8% 6.3% 6.2% 6.4% 6.5% 6.2% 5.7% 5.1% 4.5% 5.1% 5.3% 5.5% 339.0 336.7 331.0 324.1 317.2 313.9 308.3 302.5 297.2 295.2 290.3 284.5 279.1 278.0 274.7 270.8 2 2 2 2 2 (P) 3 3 3 3 4 4 4 4 2016 -1 2017 -1 2018 -1 2019 -1 (P) Percent Growth Year-Over-Year 12% 8% 4% 0% -4% -8% -12% -16% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018P 2019P 2020P 2021P -15.1 -10.9 -12.1 4.3 10.1 5.9 5.4 9.0 7.0 8.7 6.3 5.1 1.4 -2.1 Millions 7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Current 2018P 2019P 2020P 2021P 5.4 ( SAAR ) 5.4 5.2 5.2 5.2 EXCLUSIVE REPORT: Remodeling Market Outlook 24 October 2018 QR QualifiedRemodeler.com

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