Metropolitan Areas: Recent Changes

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1 Remodeling Activity in Metropolitan Areas: Decade Trends and Recent Changes Susie Chung Remodeling Futures Conference ence November 9,

2 Remodeling Spending Varies Substantially Across Metro Areas Average annual remodeling spending per household, High spending Low spending Source: AHS Universe: Largest 35 metropolitan areas by population for which AHS data is available. Spending figures are weighted by population, income, year built, and structure type.

3 Metros with Higher Incomes and Home Values Spent 1/3 More on Remodeling Activity Average annual remodeling spending, (real 2009 dollars) 4,500 4,000 $4,010 $4,040 3,500 3,000 2,500 2,000 1,500 1, $3,020 72% 83% $2,330 $2,200 0 All metros 10 metros with highest income 10 metros with lowest income 10 metros with highest home values 10 metros with lowest home values Source: AHS Metros in the metro categories are chosen from the largest 35 metropolitan areas. New Orleans is excluded d due to uncharacteristic spending during the decade median values were used for income and home value metro groupings.

4 Home Age Varies Extensively by Metro and Region Year median home was built Source: ACS Universe: All metropolitan areas (513 areas) for which ACS data is available.

5 Metros with Newer Homes Spent 25% Less on Remodeling than Older Metros Average annual remodeling spending, (real 2009 dollars) 3,500 3,000 2,500 2,000 1,500 1, $3,170 $3,200 $3,220 $2, s 1960s 1970s 1980s Metro categories of median year structure built Source: AHS Metros in the metro categories are chosen from the largest 35 metropolitan areas. The 1980s category includes Las Vegas, the metro with the youngest homes and a median year built of 1991.

6 Discretionary Projects Comprise 47% of Total Remodeling Spending in Main Metro Areas Percentage of remodeling spending that is discretionary, Source: AHS Discretionary projects include kitchen or bath remodels, additions, and space reconfigurations.

7 Areas with a Higher Share of Discretionary Spending Spent 25% More on Remodeling Average annual remodeling spending, (real 2009 dollars) 4,000 $3,773 3,500 3,000 $3,016 75% 2,500 2,000 $2,158 1,500 1, All metros 10 metros with highest discretionary share 10 metros with lowest disretionary share Source: AHS Metros in the metro categories are chosen from the largest 35 metropolitan areas. New Orleans is excluded d due to uncharacteristic spending during the decade median values were used for incomes and home values metro groupings.

8 Large Swings in Remodeling Spending in Overheated/High Mortgage Delinquency Areas Average annual remodeling spending per household (real 2009 dollars) $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ Not boom-bust metros Boom-bust metros Source: AHS , 2009 MBA Loan Performance. Largest 35 metropolitan areas in population for which AHS data is available. Boom-bust metros are categorized as areas with high delinquency rates in 2009.

9 Home Improvement Spending Tracks with Home Price Appreciation Trend Index of home prices and remodeling spending of major metropolitan areas Case Shiller Composite 20 Index Remodeling spending index Source: S&P/Case-Shiller Shill Composite 20 Index from economy.com, AHS Index of remodeling spending per household includes Case-Shiller metros for which remodeling data is available. S&P/Case Shiller index is seasonally adjusted.

10 Energy-related Projects Fared Better than Other Replacement Projects in all Regions Change in remodeling expenditures from 2007 to % 0% -10% -20% -30% -40% -50% Northeast South Midwest West Energy related projects Other replacement projects Source: AHS Universe: Largest 35 metropolitan areas by population for which AHS data is available.

11 Healthy Recovery will be in Markets with a Combination of Favorable Conditions Factors important for healthy remodeling activity Income Home value Age of the home House price appreciation/depreciation i i i Share of remodeling spending on discretionary projects Next map: Assign each metro a value (1-5) for each factor based on 2009 values E.g. New York City For each metro, add up values across the categories E.g. New York City = 2

12 Healthy Recovery will be in Markets with a Combination of Favorable Conditions Ranking of largest 35 metros by income, home value, home age, price appreciation, and discretionary spending Favorable conditions Less favorable conditions Source: ACS Darker metros are areas with favorable remodeling conditions in 2009: higher income, older homes, higher home values, higher home value appreciation, and higher discretionary share of spending.