March 2016 Remodeling Business Pulse Tracking Remodeling Conditions & Outlook. Conducted by:

Transcription

1 March 2016 Remodeling Business Pulse Tracking Remodeling Conditions & Outlook Conducted by:

2 Table of Contents Page Research Objectives & Strategies 3 Questionnaire Outline 4 Methodology 5 Executive Summary 6 Detailed Findings Remodeling Business Pulse 9 Current Conditions 10 Future Conditions 18 Regional Results 24 Remodeling Trends 29 Appendix: Verbatim Comments on Sales 35 2

3 Research Objectives & Strategies Objectives Gain a quarterly measure of the current health of the industry and outlook for the near term Provide insight on specific business issues Use in lobbying efforts and to inform NARI members Strategies Get high levels of survey participation by making survey: Quick to complete Require no upfront time to gather data Use one scale as much as possible to make responding easier Allow respondents to express both the direction they think things are heading and the strength of that change Add questions focused on a selected business issue(s) 3

4 Questionnaire Outline Overall rating of current conditions Breakout of current conditions on inquiries, requests for bids, conversion to jobs, sales value of jobs sold Outlook for conditions three months from now Reasons for favorable or unfavorable outlook Comments on the future Question about strength or specific remodeling trends 4

5 Methodology Survey conducted online March 15-25, ed initial invitation and two reminders to 495 members who were in the NARI Research Panel 159 completed interviews 32.1% completion rate Median time to complete 3.3 minutes Question on remodeling trends added 1.2 minutes (included in the total) Unless otherwise noted, the base size for each result is 159 Rating scales used are almost always 1 to 9 with 1 being the most negative and 9 the most positive. 5 was labeled as neutral for almost all of these questions. Where statistical significance is referenced, it is at the 90% confidence level. When directional is mentioned, that means that the difference is not statistically significant. 5

6 Executive Summary 6

7 Remodeling Business Pulse 1 st Quarter 2016 The 1 st quarter Remodeling Business Pulse points to a moderating rate of remodeling growth in the first two quarters of March ratings for current conditions declined directionally from December. While the 5.84 still reflects growth (above a 5 rating), the rating was one of the lowest we have seen in the 17 waves of this study and at levels not seen since The sub-components of current conditions were mixed in March; two up and two down. We saw directional increases in Number of inquiries and Requests for bids. Conversion of bids to jobs had a significant decline and Value of jobs sold fell directionally. Here are the ratings and the change versus the December study: Number of inquiries was at 5.96, up 4.0% Requests for bids came in at 5.92, up 2.6%. Conversion of bids to jobs was 5.44, down 5.4%. Value of jobs was 6.03 a decline of 2.9%. It appears that the softening in the current business is due to difficulty converting bids to jobs and projects being of a smaller size. Strength of sales in 3 months at 6.21 a statistically significant drop from the 6.46 in March of last year. (Comparisons for this measure are made against the study s results for same period in the prior year.) This is the third quarter in a row of significant declines. With a rating above 5, this is still an indicator of growth, albeit at a more moderate pace. Looking at expected conditions 3 months from now, continues to show a large majority (70%) of remodelers expecting growth while a much smaller group (9%) seeing some level of decline. The balance (21%), see sales being about where they were last year. Growth is being driven by several factors. People needing to do projects that had been postponed remained #1 at 77%, up slightly from year-ago. Home prices improving was #2 at 56%. This is somewhat higher than it was last year. Economic growth and Company improvements (marketing, sales, etc.) were tied for #3 at 34%. Economic growth was a large drop from the level in March 2015, while Company improvements were off just slightly. The West appears to have a lead when compared to the other regions of the US. While the differences generally are not statistically significant, the West is directionally stronger on all measures. 7

8 Trends In Remodeling Based on broad ranging research on trends done in December and other inputs, 12 specific trends were examined in this study. Remodelers were asked how they saw each trend in terms of its gaining or loosing interest. Replacing tubs with walk-in showers, Creating open floor plans, and High efficiency lighting were the top three in strength of growth. Adding privacy walls to open spaces are declining in interest. Marble countertops are declining and Quartz countertops are growing strongly. Two highly discussed remodeling areas had quite different trend ratings. Universal design/aging in place did fairly well at #6 overall. Home automation was weaker at #9. The West is significantly strong than all other regions for Water conservation and High efficiency lighting. The Midwest stood out as stronger than all other regions for Mud rooms. Remodelers who are strongly positive about sales 3 months from now have significantly higher trend ratings for the following areas. Replacing tubs with walk-in showers Incorporating high end finishes Quartz countertops Universal design/aging in place 8

9 Detailed Findings Remodeling Business Pulse 9

10 Current Conditions 10

11 Rating of current business fell by a directional amount in March. It is however the first time since 2012 that the current rating has been below How would you rate your current sales compared to the same time last year? , 9% 9, 11% March 16 1, 3% 2, 1% 3, 6% 4, 14% , 16% 5, 22% 6, 17% % by individual rating 1 to 9 Ratings are from 1 to 9 where 1 = Much Worse, 5 = About the Same, 9 = Much Better 11

12 Number of inquiries: A directional recovery from December s results. Still lower than in 2014 and early Compared to the same time last year how would you rate the following items that impact sales? Number of inquiries , 10% 9, 8% March 16 1, 2% 2, 1% 3, 4% 4, 8% , 22% 5, 27% 6, 18% % by individual rating 1 to 9 Ratings are from 1 to 9 where 1 = Much Worse, 5 = About the Same, 9 = Much Better 12

13 Requests for bids: A directional recovery to levels similar to last September. Compared to the same time last year how would you rate the following items that impact sales? Requests for Bids March 16 1, 1% 2, 1% 9, 6% 3, 4% 8, 8% 4, 7% , 20% 5, 30% 5.4 6, 23% % by individual rating 1 to 9 Ratings are from 1 to 9 where 1 = Much Worse, 5 = About the Same, 9 = Much Better 13

14 Conversion of bids to jobs: After holding relatively flat, a significant drop in March. A key area of weakness Compared to the same time last year how would you rate the following items that impact sales? Conversion of Bids to Jobs , 13% 6, 21% 9, 3% 8, 9% March 16 1, 1% 2, 3% 3, 8% 4, 12% % by individual rating 1 to 9 Ratings are from 1 to 9 where 1 = Much Worse, 5 = About the Same, 9 = Much Better 5, 31% 14

15 Sales value of jobs sold: A directional decline vs. December and the return to a declining trend. Compared to the same time last year how would you rate the following items that impact sales? Sales value of jobs sold , 13% 7, 16% 9, 8% March '16 1, 1% 2, 1% 3, 4% 4, 9% 5, 24% 6, 24% % by individual rating 1 to 9 Ratings are from 1 to 9 where 1 = Much Worse, 5 = About the Same, 9 = Much Better 15

16 Even with a decline, Sales Value remains the strongest sub-measure. Conversion to jobs, returned to its position of being clearly the weakest measure Comparison of Current Ratings Overall Inquires Bid Requests Conversion to jobs 6.03 Sales Value 16

17 After some stability, Conversion of Bids to Jobs has gotten somewhat weaker as has Sales Value of Jobs Sold. 7.0 Mean Rating (1 to 9 scale) Number of Inquires Requests for Bids Conversion of Bids to Jobs Sales Value of Jobs Sold 17

18 Future Conditions Note: The analysis of future business rating is done by comparing this study s rating to the responses collected at the same time last year. This is different than the approach for the current business conditions where quarter to quarter comparisons appear most appropriate. 18

19 Strength of sales in 3 months: A statistically significant drop from This is the second quarter in a row with year-over-year significant declines. Now we would like your input on the future. Compared to the same time last year, how strong do you think sales will be three months from now? March , 9% 7, 26% 1, 0% 9, 6% March '16 2, 0% 3, 3% 4, 6% % by individual rating 1 to 9 Ratings are from 1 to 9 where 1 = Much Worse, 5 = About the Same, 9 = Much Better 6, 28% 5, 21% 19

20 Postponed Projects remained the #1 growth driver, with gains this quarter vs Home Prices Improving gained and is now #2. Economic Growth (down sharply) and Company Improvements (down slightly) tied for #3. People needing to do projects that had been postponed More certainty about the future Economic growth Home prices improving Low interest rates Improving employment Company Improvement (marketing, sales, etc.) Stock market growing March '16 Dec '15 Sept '15 June '15 March '15 Loans easier to get Weather damage related projects Other - please fill in 0% 20% 40% 60% 80% 100% Base 111 (asked of those rating future sales a 6 or higher) Multiple responses allowed 20

21 Other Reasons for Growth More interest from consumers Still low loan score Can't imagine it staying this bad I have work booked through 2016 Gas prices are lower, people have more money Strong Real Estate market Crowd mentality Optimism for government improvement New source of income thru remodeling churches Weather more suitable for larger projects Seasonal Denver's good housing market Time of year (after taxes) The above are inputs as supplied by the respondents. Only minor editing has been performed. 21

22 Reasons for Declines The number of remodelers seeing declines in three months was small at 24. Data on a sample this small is not statistically valid, so it is not included in this report. Consistent with previous waves, High Levels of Uncertainty About the Future was the most common reason for forecasting declines. 22

23 Optional Specific Comments About Current or Future Sales Do you have any specific comments about current or future sales? 41 of 159 wrote in a specific comment The majority were positive comments 51% Positive 12% Neutral 37% Negative Major Positive Themes Bigger projects Sales activities going well Strong underlying demand Major Neutral Themes Will political environment hurt or help? Major Negative Themes Inability to hire workers is limiting growth Presidential elections adding uncertainty Customers hesitant See the appendix for verbatim comments 23

24 Regional Responses Our target for reporting results is 30 or more respondent per region. Only one region failed to meet that target and only by one respondent. Therefore we elected to include the regional results in this report. Respondents by Region Region Mar June Sept Dec Mar June Sept Dec Mar Northeast Midwest South West Total

25 Regional Definitions 25

26 The West region has the strongest rating for current business conditions, while the Northeast lags. (The differences by region are not statistically significant.) Current Business Rating Northeast Midwest South West 26

27 The West has the highest ratings on all sub-measures of current conditions. The West s lead is statistically significant only for Requests for bids and only against the Southern Region Ratings by Regions Number of Inquiries Request for bids Conversion of bids into jobs Northeast Midwest South West Sales value of jobs sold 27

28 The outlook for the future is directionally strongest in the West. (None of the differences between the regions is statistically significant.) Future Business Rating Northeast Midwest South West 28

29 Remodeling Trends 29

30 Remodeling Trends In the December RBP study, we asked NARI remodelers to identify trends they were seeing in their business. Since the respondents could put in anything they thought of, the responses were highly varied. In this study, we took selected responses from the prior study wave and added a few that had been informally mentioned. In total, a list of 12 different trends were included in this study and respondents were asked: How do you find the interest in the following areas are trending? Please rate it on a scale of 1 to 9 where 5 is about the same as last year, 1 is much less and 9 is much more. If you don t know or the trend is not applicable to your business, please select that response. 30

31 The trends that were studied were applicable to the bulk of remodelers. % With Trend Knowledge Creating open floor plans Quartz countertops Incorporating high end finishes Replacing tubs with walk-in showers High efficiency lighting Universal design/aging in place Marble countertops Mud rooms Water conservation Ways to save on HVAC costs Home automation Adding privacy walls to open spaces 69% 94% 93% 93% 92% 91% 91% 86% 85% 83% 79% 79% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Half of the trends studied (6) were applicable to above 90% of remodelers. On the low end, Adding privacy walls to open spaces was given a trend rating by slightly less than 70%. Two commonly discussed trends were in the middle of the group: Home automation 79% Universal design 91% 31

32 Walk-in Showers and Creating Open Floor Plans lead as growing trends Replacing tubs with walk-in showers Creating open floor plans High efficiency lighting Quartz countertops Incorporating high end finishes Universal design/aging in place Mud rooms Ways to save on HVAC costs Home automation Water conservation Marble countertops Adding privacy walls to open spaces Mean Trend Rating 4.1 Declines 4.8 Growth High efficiency lighting, quartz countertops and using high end finishes broadly were also growing trends with a 6 or higher mean rating. Universal design came in slightly behind the leaders at 5.8 Falling into the next tier of growth were Mud Rooms, HVAC savings, and Home Automation. Water conservation is holding steady with a 5.1 mean. Marble countertops and adding privacy walls to open spaces are declining with means below 5. Quartz countertops are growing (6.0) compared to Marble that are declining (4.8)

33 Even with small sample sizes, there are many statistically significant differences in trends by region. Mean Trend Rating Universal design/aging in place Water conservation Mud rooms Quartz countertops Marble countertops Adding privacy walls to open Creating open floor plans Home automation Incorporating high end finishes Replacing tubs with walk-in High efficiency lighting Ways to save on HVAC costs West South Midwest Northeast The West shows a significantly stronger growth trend vs. all other regions for: Water conservation High efficiency lighting The Midwest is significantly stronger vs. all other regions for Mud rooms The Northeast lags behind one or more regions for: Home automation Incorporating high end finishes Quartz countertops leads significantly over marble in all regions but the differences are largest in the Midwest and West. Notes: Ratings of above 6 indicate a growing trend, below 5 indicate a declining one. Sample sizes by trend item vary by region due to unique levels of don t know. Some individual region sample sizes can be quite small with a low of 22. The largest regional sample for a trend is

34 Remodelers with positive sales growth outlooks rate many trends as being significantly stronger. Mean Trend Rating Replacing tubs with walk-in High efficiency lighting Creating open floor plans Incorporating high end finishes Quartz countertops Universal design/aging in place Mud rooms Ways to save on HVAC costs Home automation Water conservation Marble countertops Adding privacy walls to open Strong Growth Moderate to No Growth Across the board, those with strong growth sales predictions have higher trend growth ratings than those sales outlook are moderate to no growth. These leads for the strong growth group are statistically significant for: Replacing tubs with walk-in showers Incorporating high end finishes Creating open floor plans Quartz countertops Universal design/aging in place Strong growth = sales in 3 month rating of 7, 8, or 9. Base size 66 Moderate to no growth = sales in 3 month rating of 6 or less. Base size 93 34

35 Fred Miller President, Consumer Specialists