Remodeling Industry Update

Transcription

1 Remodeling Industry Update Kermit Baker Remodeling Futures Program September 22,

2 Remodeling Market Issues 1. Which households benefited from housing market run-up earlier this decade? Which ones are most vulnerable to the downturn? 2. What s the geography of home improvement trends? 3. Federal stimulus funding is it helping remodeling? 4. Which remodeling segments are doing the best at present? 5. Remodeling market outlook is there any evidence of an emerging recovery?

3 With Booming Stock and Housing Market, Average Household Wealth Doubled Between 1995 and 2007 Average household net wealth, 000s of 2007$ 600 Non-housing Housing Sources: Survey of Consumer Finances, Federal Reserve Board.

4 Older Homeowners, Who Benefited From the Long Run-Up in House Prices, Had Higher Levels of Housing Wealth at Peak of Market Average household net housing wealth, 2007, $000s Under All Owners Age of Head Source: 2007 Survey of Consumer Finances, Federal Reserve Board.

5 While All Income Groups Benefited From the House Price Run-Up, Upper-Income Households Benefited the Most Average household net housing wealth, 2007, $000s Lowest Quartile Second Quartile Third Quartile Highest Quartile All owners Income Source: 2007 Survey of Consumer Finances, Federal Reserve Board.

6 Decline in Housing and Non-Housing Wealth Since the End of 2007 Has Been Dramatic Average household net wealth, 000s of 2007$ 600 Non-housing 500 Housing Q-2 Notes: Housing wealth estimates for 2009 based on change in S&P/Case-Shiller U.S. National Home Price Index from end of 2007 to Q ; non-housing wealth estimates for 2009 based on change in Dow Jones Industrial Average from end of 2007 to Q Sources: Survey of Consumer Finances, Federal Reserve Board.

7 Higher Valued Homes Didn t Rise as Fast During the Boom, and Haven t Fallen as Far During the Bust Index, January, 2000= Low Tier Middle Tier 250 High Tier Q1 2005Q1 2007Q1 2009Q1 Notes: House values for tiers: Low - under $273,900; Middle - $273,900-$428,000; High - over $428,000. High value for tiers: Low - June, 2006; Middle Feb. 2006; High March, 2006; Overall March, Source: S&P/Case-Shiller Home Price Indices.

8 During Recent Housing Boom, Lower Price Homes Have Been Much More Volatile, Both on the Upside and the Downside % change in house values 150% 2003 Q1 to High 100% 50% 92% 71% High to 2009 Q-2 55% 69% 0% -50% -44% -34% -23% -31% -100% Low Tier Middle Tier High Tier Overall House value category Notes: House values for tiers: Low - under $273,900; Middle - $273,900-$428,000; High - over $428,000. High value for tiers: Low - June, 2006; Middle Feb. 2006; High March, 2006; Overall March, Source: S&P/Case-Shiller Home Price Indices.

9 Previously Overheated Markets Have Typically Seen the Steepest Price Declines Of 50 largest metro areas in U.S., top and bottom 10 metro areas for house price changes over past year Note: Change in prices measured over past 12 months (2008Q2~2009Q2) Sources: NAR Real Estate Outlook; Moody's Economy.com estimates of median sales price of existing single-family homes

10 Which In turn Have Produced the Greatest Increase in Home Sales Recently Of 50 largest metro areas in U.S., top and bottom 10 metro areas for home sale changes over past year Note: Change in sales measured over past 12 months (2008Q2~2009Q2) Sources: NAR Real Estate Outlook; Moody's Economy.com estimates of total existing single-family home sales

11 With Wealth Eroding, Households Have Increased Their Savings Rate Personal saving rate (%), SAAR 6% 5% 5.0% 4% 3.6% 3.5% 3.4% 3.8% 3% 3.2% 2.5% 2.5% 2% 2.2% 1.6% 1% 1.2% 1.2% 0% Source: U.S. Bureau of Economic Analysis, National Income and Product Accounts

12 Less Than Half of Contractors to Date Have Worked on Projects Funded Under Stimulus Program % of firms by 2008 revenue that to date have worked on projects directly or indirectly funded through federal stimulus program funds 60% 54% 40% 45% 38% 41% 47% 20% 0% all firms under $100K $100-$249K $250-$499K $500K or more Source: JCHS National Green Remodeling Survey, July, 2009.

13 Building Envelope Energy Tax Credit Projects Dominate Reported Stimulus Funded Activities Of remodeling contractors with projects funded through federal stimulus program funds, % of firms by type of project 100% 89% 80% 60% 40% 31% 20% 0% ETC - Bldg Env. ETC - HVAC Systems 10% ETC - Renewable Energ. 5% Modernization - Pub. Hsng. 12% Lead Paint Reduc. 3% Other Source: JCHS National Green Remodeling Survey, July, 2009.

14 Firms Working on Stimulus Funded Projects Expecting Only Modest Impact This Year Of firms with stimulus funded projects, anticipated share of 2009 revenue coming from these projects Over 25% 4% 10% to 25% 19% Hardly any 24% 5% to 10% 27% Under 5% 26% Source: JCHS National Green Remodeling Survey, July, 2009.

15 Homeowner Improvement Spending Continues to Trend Down, But Downturn is Moderating 30% Four-Quarter Moving Rate of Change for Owner Spending on Home Improvement Projects 20% 17.6% 14.8% 10% 16.0% 10.6% 6.8% 3.1% 0% -0.1% -10% -20% -4.0% -8.8% -11.1% -10.6% -14.0% -13.6% -16.1% -30% (e) Source: Joint Center for Housing Studies.

16 Tracking the Home Improvement Market: New Industry Data Sources Top Remodeling Contractor Databases Qualified Remodeler Magazine Remodeling Magazine Consumer Surveys HIRI Consumer Sentiment Index Contractor Surveys NAHB Remodeling Market Index JCHS/Specpan National Green Remodeling Survey Consumer Home Improvement Inquiry Databases ServiceMagic Home Remodeling and Repair Index

17 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;

18 Number of Owners Planning Home Improvement Projects Still Declining From Year-Ago Levels, But Pace is Moderating Three month moving averages compared to year-ago level for number of owners planning home imp. projects 20% 10% 0% -10% -7.4% -5.4% -4.8% -4.1% -4.5% -4.0% -20% 2009-Mar Apr May Jun Jul Aug(p) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August figure based on July and August data only. Source: The Home Improvement Research Institute.

19 Number of Planned Projects and Total Planned Spending Also Moderating Three months moving averages compared to year-ago level for number of owners., no. of projects, and planned spending for planned home improvement projects 20% 10% No. hhs. planning projects No. projects Total spending 0% -7.4% -5.4% -4.8% -4.1% -4.5% -4.0% -10% -9.0% -7.8% -7.1% -7.2% -6.6% -11.7% -11.0% -13.4% -13.9% -14.4% -14.5% -18.8% -20% 2009-Mar Apr May Jun Jul Aug(p) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August figure based on July and August data only. Source: The Home Improvement Research Institute.

20 Planned Spending Recovering Faster for Upper- Income Homeowners Three months moving averages compared to year-ago level for spending for planned home improvement projects 10% 0% Tot. spending Under $45K $100K and over -10% -20% -30% 2009-Mar Apr May Jun Jul Aug(p) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August figure based on July and August data only. Source: The Home Improvement Research Institute.

21 And Also for Less-Leveraged Seniors Three months moving averages compared to year-ago level for spending for planned home improvement projects 30% 20% Total spending Under and older 10% 0% -10% -20% -30% 2009-Mar Apr May Jun Jul Aug(p) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August figure based on July and August data only. Source: The Home Improvement Research Institute.

22 DIY Projects Coming Back Faster Than Professionally- Installed Improvements Three month moving averages compared to year-ago level for spending for planned home improvement projects 10% 0% Tot. spending DIY Pro -10% -20% -30% 2009-Mar Apr May Jun Jul(p) Notes: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; July figure based on June and July data only; combined DIY/Pro projects classified as pro. Source: The Home Improvement Research Institute.

23 Financing Home Improvement Projects With Credit Still Lagging Other Payment Options Three months moving averages compared to year-ago level for number of planned home improvement projects 10% 0% All projects Loans Cash Gifts and other -10% -20% -30% 2009-Mar Apr May Jun Jul Aug(p) Note: Monthly figures are 3-month moving averages centered on reported month and normalized per 100,000 responses; August figure based on July and August data only. Source: The Home Improvement Research Institute.

24 Leading Indicator of Remodeling Activity Points to Market Nearing Cyclical Low By Early Next Year Homeowner improvements four-quarter Moving Totals, billions of $ Four-Quarter Moving Rate of Change $160 25% $150 $140 $130 $120 $110 $100 $ % $144.4 $144.9 $145.8 $ % 10.6% 6.8% $ % $ % $ % $ % $ % $121.0 $120.1 $ % -13.6% -16.1% $112.4 $106.8 $105.4 $ % -11.7% -12.3% -11.0% 20% 15% 10% 5% 0% -5% -10% -15% -20% $ % US Census Bureau LIRA Source: Joint Center for Housing Studies.

25 Quarterly Home Improvements Estimates Point to Probable Market Recovery in First Half of Next Year Homeowner improvements Quarterly figures, billions of $ (NSA) Change from same quarter year-ago $50 20% $ % $43.4 $ % $40 $35 $30 $25 $20 $ % 1.5% $34.7 $29.8 $ % 0.8% -4.6% $ % $23.7 $31.0 $ % -3.0% $ % $21.7 $ % -18.7% -20.5% $ % -4.9% $ % $21.5 0% -10% -20% $ % US Census Bureau Implicit LIRA projection Source: Joint Center for Housing Studies.

26 Summing Up: The Remodeling Outlook Remodeling industry still recovering from housing downturn; economic recession; and significant loss of home equity wealth. Stimulus program/green initiatives having only modest impact on home improvement spending. Remodeling consumers/sectors recovering fastest: Seniors Upper-income Smaller cash projects Home improvement recovery looks to get underway during first half of 2010.