Remodeling Activity in Metropolitan Areas: Decade Trends and Recent Changes Susie Chung Remodeling Futures Conference ence November 9, 2010 www.jchs.harvard.edu
Remodeling Spending Varies Substantially Across Metro Areas Average annual remodeling spending per household, 2000-2009 High spending Low spending Source: AHS 2001-2009. 2009 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.
Metros with Higher Incomes and Home Values Spent 1/3 More on Remodeling Activity Average annual remodeling spending, 2000-2009 (real 2009 dollars) 4,500 4,000 $4,010 $4,040 3,500 3,000 2,500 2,000 1,500 1,000 500 $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 2001-2009. 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. 2005 median values were used for income and home value metro groupings.
Home Age Varies Extensively by Metro and Region Year median home was built Source: ACS 2009. Universe: All metropolitan areas (513 areas) for which ACS data is available.
Metros with Newer Homes Spent 25% Less on Remodeling than Older Metros Average annual remodeling spending, 2000-2009 (real 2009 dollars) 3,500 3,000 2,500 2,000 1,500 1,000 500 $3,170 $3,200 $3,220 $2,400 1950s 1960s 1970s 1980s Metro categories of median year structure built Source: AHS 2001-2009. 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.
Discretionary Projects Comprise 47% of Total Remodeling Spending in Main Metro Areas Percentage of remodeling spending that is discretionary, 2000-2009 Source: AHS 2001-2009. 2009 Discretionary projects include kitchen or bath remodels, additions, and space reconfigurations.
Areas with a Higher Share of Discretionary Spending Spent 25% More on Remodeling Average annual remodeling spending, 2000-2009 (real 2009 dollars) 4,000 $3,773 3,500 3,000 $3,016 75% 2,500 2,000 $2,158 1,500 1,000 500 0 All metros 10 metros with highest discretionary share 10 metros with lowest disretionary share Source: AHS 2001-2009. 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. 2005 median values were used for incomes and home values metro groupings.
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 $- 2001 2003 2005 2007 2009 Not boom-bust metros Boom-bust metros Source: AHS 2001-2009, 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.
Home Improvement Spending Tracks with Home Price Appreciation Trend Index of home prices and remodeling spending of major metropolitan areas 200 180 160 140 120 100 80 60 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Case Shiller Composite 20 Index Remodeling spending index Source: S&P/Case-Shiller Shill Composite 20 Index from economy.com, AHS 2001-2009. 2009 Index of remodeling spending per household includes Case-Shiller metros for which remodeling data is available. S&P/Case Shiller index is seasonally adjusted.
Energy-related Projects Fared Better than Other Replacement Projects in all Regions Change in remodeling expenditures from 2007 to 2009 10% 0% -10% -20% -30% -40% -50% Northeast South Midwest West Energy related projects Other replacement projects Source: AHS 2007-2009. 2009 Universe: Largest 35 metropolitan areas by population for which AHS data is available.
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
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 2009. 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.