Remodeling Market Trends and Update

Transcription

1 Remodeling Market Trends and Update Kermit Baker Remodeling Futures Conference April 13,

2 Remodeling Market Issues 1. Falling levels of home equity are slowing industry recovery. 2. Households with limited home equity and low mortgage rates creating a lock-in effect that will slow mobility for years to come. 3. Lead paint rule presents tricky implementation problems; Homestar program likely to provide minor boost for energy efficiency projects. 4. Stronger sectors remain: older households; cash financed projects; pro installations.

3 Owners Equity in Their Home Has Declined by Over Half Since 2006 High Owner s equity in real estate (trillions of $) $15 $10 $5 $ Source: Federal Reserve Board Flow of Funds Accounts.

4 As a Result, Home Equity Loans are Off Almost 10% Over Past two Years Home equity loans (billions of $) 1,200 1, Notes: Includes loans made under home equity lines of credit and home equity loans secured by junior liens. Source: Federal Reserve Board Flow of Funds Accounts.

5 Almost a Quarter of All Mortgaged Homes are Under Water, With Many More at Risk Number of mortgaged homes nationally, Q share All mortgaged homes 47.6 mill. 100% Negative equity mortgages 11.3 mill. 23.8% Near negative equity mortgages* 2.3 mill. 4.9% * Near negative equity defined as properties within 5% of being in a negative equity position. Source: First American CoreLogic.

6 Areas with High Share of Loans Underwater Heavily Concentrated in Overbuilt Markets Top and Bottom 10 Metro Areas for Negative Equity Share, Q Note: Sample includes top 50 Census Bureau Statistical Areas (Metropolitan Statistical Areas and Metropolitan Divisions) by number of active mortgages that have markets with 50,000 or more loans. Source: First American CoreLogic.

7 The Recent Sharp Decline in Mobility Pre-Dates the Recession

8 Steepest Declines in Net Domestic Migration Centered in Fast-Growing Sunbelt Cities Difference in net domestic migration, 2009 vs (000s) *Hurricane Katrina caused a large movement of people from New Orleans to nearby areas such as Baton Rouge. Notes: Sample includes top 50 largest populated metropolitan statistical areas as estimated in Change in net domestic migration from 2006 to Source: U.S. Census Bureau.

9 Given High Level of Originations Recently, Mortgage Rates for Most Owners at 6% or Less Originations as share of all loans by year; average mortgage rate for year 40% 36.7% Mortgage originations as share of total outstanding 10% 30% 5.9% 29.9% 6.4% Interest rate, conventional 30-yr mortgages 6.3% 23.2% 6.0% 20% 19.5% 5.0% 5% 15.3% 10% 0% % Notes: Mortgages Originations Share may be overstated due to double counting (i.e. multiple refinancings). Source: Freddie Mac, Federal Reserve Board, Haver Analytics.

10 On the Eve of Implementation, Many Remodelers Unfamiliar with Lead Paint Regs. Familiarity with EPA s lead paint renovation, repair, and painting rule, % of remodelers Not at all familiar, 24% Very familiar, 25% Somewhat familiar, 51% Source: JCHS National Green Remodeling Survey, March 2010.

11 While Most Plan to Undertake Projs. Requiring Lead Paint Certif., Few Plan to Specialize Firm s plan to target projects requiring lead paint certification, % of firms Don't know / N.A., 14% Specialize, 2% Avoid, 29% Undertake as arise, 55% Source: JCHS National Green Remodeling Survey, March 2010.

12 Energy Efficiency Rebate Program Expected to Have Modest Impact on Spending Estimated change in homeowner spending, % of remodelers Sign. increase (>25%), 13.0% No change, 13.0% Mod. increase (10%-25%), 38.0% Small increase (<10%), 36.0% Source: JCHS National Green Remodeling Survey, March 2010.

13 Homestar Energy Efficiency Retrofit Program Goal: Lowering national energy consumption and creating jobs by increasing demand for energy efficient products thru provision of rebates to homeowners. Procedure: point-of-sale rebates from dealers, retailers, contractors, and utilities. Products covered: insulation, duct sealing, water heaters, HVAC units, windows, doors. Funding around $6 billion for fiscal years , with around $3 billion for product rebates. Status similar House and Senate bills filed with bipartisan support.

14 Homestar Rebates Could Total About 10% of Market in Covered Categories Market spending, estimated program rebates Project category Windows/doors Insulation HVAC Annual market spending (billions of $, 2007) $12.9 $2.4 $13.2 Estimated Home Star rebate allocation (billions of $) $1.3 $0.2 $1.3 Sealing* Total $2.2 $30.6 $0.2 $3.1 (10% of market spending) * Estimated from experience in Minnesota s Project Re-energize. Source: Joint Center Estimates from Congressional proposals and 2007 American Housing Survey.

15 Estimated Remodeling Spending Market Has Fallen Almost 20% From 2007 High Billions of dollars $ $ $ $200 $150 $100 $ $ (e) Owner-occ. homes Rental units Sources: JCHS tabulations of the American Housing Surveys (AHS) and the US Department of Commerce Survey of Expenditures for Residential Improvement and Repairs (C-50 reports) estimate base on JCHS LIRA.

16 Tracking Recent Home Improvement Trends: NPD/HIRI Monthly Consumer Sentiment Index National monthly survey of about 13,000 households (9,000 homeowners) on home improvement plans, with data released early the following month; Number of planned projects, estimated cost, DIY/pro installation, and expected financing information collected; Over 150 home improvement, maintenance and repair, and lawn and garden categories covered each month in survey;

17 Homeowners Planning on Increasing Spending on Home Improvement Projects 15% Three month moving averages compared to year-ago level for planned level of spending by owners 10% 5% 8.9% 7.2% 0% 4.3% -5% -2.4% -10% -6.2% -8.4% -15% -20% -11.8% -10.0% -9.3% -11.7% -15.6% -17.5% -11.7% Mar'09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan'10 Feb Mar (e) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; February estimate based on January and February data only. Source: JCHS tabulations of the Home Improvement Research Institute s monthly Consumer Sentiment Tracking Study, Feb Mar

18 Planned Spending by Older Owners Exceeds That of Their Younger Counterparts Three month moving averages compared to year-ago level for spending by owners for planned home improvement projects by age of respondent 40% 30% 20% Under All 10% 0% -10% -20% -30% -40% Mar'09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan'10 Feb Mar (e) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; February estimate based on January and February data only. Source: JCHS tabulations of the Home Improvement Research Institute s monthly Consumer Sentiment Tracking Study, Feb Mar

19 Planned Kitchen, Bath and Room Addition Projects Have Begun to Recover in Recent Months Three month moving averages compared to year-ago level for spending by owners for planned home improvement projects by project type 20% 10% Kitchen, Bath, Room Additions & Alterations Exterior Replacements All Projects 0% -10% -20% -30% Mar'09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan'10 Feb Mar (e) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; February estimate based on January and February data only. Source: JCHS tabulations of the Home Improvement Research Institute s monthly Consumer Sentiment Tracking Study, Feb Mar

20 Planned Spending on Professional Projects Generally Outpacing Do-It-Yourself Activity Three month moving averages compared to year-ago level for spending by owners for planned home improvement projects 15% 10% 5% Pro DIY Total Pro & DIY 0% -5% -10% -15% -20% Mar'09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan'10 Feb Mar (e) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; February estimate based on January and February data only. Source: JCHS tabulations of the Home Improvement Research Institute s monthly Consumer Sentiment Tracking Study, Feb Mar

21 Leading Indicator of Remodeling Activity Points to Healthy Recovery as Year Progresses Homeowner Improvements Four-Quarter Moving Totals Billions of $ Four-Quarter Moving Rate of Change $150 $145 $140 $145.8 $146.2 $144.2 $ % 30% $135 $ % $130 $125 $120 $115 $110 $ % 3.1% -0.1% -4.0% -8.8% $125.7 $121.0 $120.1 $118.2 $ % -11.1% -14.0% -13.6% -16.1% -5.4% $ % $ % $ % $ % $ % $ % 0% -10% -20% $ % US Census Bureau LIRA Source: Joint Center for Housing Studies.