The “Pulse of the Home Improvement Industry” is presented by the Home Improvement Research Institute (HIRI). The following is from the September 2012 monthly report, which provides a quick overview of the latest home improvement industry data from a variety of sources, and measures growth by comparing new data with previous data.
Across the board, most of the data points toward growth, though what remains questionable is the extent of that growth and the impact it will have on remodeling.
The latest HIRI report predicts a 5.3 percent increase in the consumer market sales and total home improvement product sales to increase by 4.9% by the end of 2012. Both growth patterns are largely attributed to the steady housing market recovery experienced this year and include expectations of continued growth by almost 6 percent into years 2014 and 2015.
Retail sales in building material and garden equipment/supplies dealer categories have also seen continuous gains month over month from May 2011 to May 2012. Despite a slight drop in June, sales are predicted to increase and continue growth into July 2012.
Harvard’s Joint Center for Housing Studies’ Leading Indicator of Remodeling Activity (LIRA) report is reporting the most positive signs of future growth, into double-digits by 2013. “Now, the combination of low financing costs, stronger consumer confidence, improving home sales, and the perception that home prices have stabilized in most markets across the country are encouraging owners to start working on the list of home improvement projects they have been putting off,” Kermit Baker, director of the Remodeling Futures Program at the Joint Center says in a press release. The LIRA places remodeling activity at $128.9 billion by the first quarter 2013.
Housing market growth is key indication
The U.S. Census Bureau reports July 2012 new home sales are 25.3% above last year’s June estimate with increases across all regions. Existing single family home sales were 9.9% above July 2011, with year over year increases over the last seven months. The Midwest saw the largest year over year increase at 16.7 percent.
Affordability is also becoming a key indication of future growth. National home prices increased by 6.9% since last quarter and are up by 1.2% since last year. The National Association of Realtors’ Housing Affordability Index places the national average at 182 but averages in the Northeast and West declined last month while the Midwest and South increased.
Mortgage rates increased slightly since July, yet the current average mortgage rate for 2012 is at 3.79, while the average mortgage rate in 2011, at 4.45, was the most affordable rate on record since 1971.
Areas needing improvement
With the good always comes the areas that still need improvement. Unemployment holds strong at 8.1% and hasn’t shown much improvement in 2012 whatsoever. Five million of those unemployed (about 40 percent of total unemployed population) are considered long-term. Disposable income is also slow to grow, only up 2% since last year, landing at $10,355 billion dollars. The unemployment rate is also what brings the consumer confidence level down to the lowest level since November 2011 and it is not likely to increase in the near future.
Takeaway for remodelers
Based on what is known, remodelers may want to take advantage of areas of growth.
Home sales and mortgage rates: Two things are working for the remodelers right now—home sales and affordability are improving and should be watched closely in the local markets. This also probably has a lot to do with record-breaking mortgage rates, even though lending is still tight.
But, homeowners who are able to capitalize on these low mortgage rates are more likely to call a professional within the first year of moving into a new home, to make changes and upgrades. Remodelers may consider partnering with real estate professionals or using real estate events as a starting point for finding the new homeowners. Plus, Realtors are happy to recommend high-quality professionals to their clients in order to finalize the sale.
Providing solutions that make sense: Unemployment is not exactly where it should be, elections are ahead and many people are under pressure to make repairs that have been postponed. Most people who are hiring a professional will not only benefit from knowing their project will be done right, but Will also benefit from a remodeler’s expertise. Figure out your client’s pain points, and provide them incentives, solutions to keep costs down, options at different cost levels, guidance in collecting other incentives like tax credits. Make it easy for them to feel good about putting money into their home by understanding their needs and providing the best solutions possible.
Keep it long term: All signs point toward homeowners staying long-term and so should you, as their go-to professional. Focus on improvements and projects completed over a long period of time, incorporate universal design elements into the project or recommend durable and maintenance-free products. Make sure clients are not getting a quick fix, but making investments that will last forever.
NARI is a proud member of the Home Improvement Research Institute (HIRI), a membership based independent not-for-profit organization of manufacturers, retailers, wholesalers and allied organizations in the home improvement industry. Its mission is to be recognized as the primary authority for effective, useful information about home improvement products and services in North America. HIRI’s primary research encompasses baseline and tracking studies which profile the characteristics, attitudes and buying behaviors of consumer and professional remodeler customers. Research is proprietary to member companies and is geared to meet the individual needs of the Institute’s membership base while gathering data which accurately gauges trends in the market. -Morgan Zenner