The remodeling industry is in a position to grow as remodeling expenditures are predicted to rise at an inflation-adjusted 3.5% average annual rate, according to a recent study by the Joint Center for Housing Studies at Harvard University. The report on the study, entitled "A New Decade of Growth for Remodeling," also recognized changes in consumer spending habits when it came to remodeling projects.
The report noted that the housing market itself offered a few reasons why the remodeling industry may pick up in the years ahead. It was noted that there are more houses in the market today, many of which are on the older side, and the improved income gains of homeowners all may contribute to more remodeling in the future. As for homeowners actually contributing to the remodeling industry, the study, which used 2009 as the most recent data, found that during that year more than 21 million homeowners spent more than $185 billion on home improvement projects. The average cost was $8,790 per project.
The study found that the remodeling industry peaked in 2007, after the burst of the housing bubble, but before the collapse of the financial system, and then fell by 12% between 2007 and 2009.
Researchers were quick to point out, however, that while the housing market does provide opportunities to those in the remodeling industry, it can also negatively impact numbers. The downturn in the housing market has meant that fewer people are selling their homes, which often provides great opportunities for remodelers both with sellers making improvements and buyers often fixing things they don't like.
The study also showed that rental property owners were spending more on improvements and remodels. Researchers hypothesized that with the recent housing market crash and the current cost and financing responsibilities of purchasing a new home, renting was a more viable option for some people.
Spending was also found to be concentrated in metropolitan areas as compared to non-metro and rural areas. The report pointed out that this trend reflects that data that there are more higher income households and higher priced homes located in urban and metro areas. According to the report, the top 35 metro areas were home to 43% of homeowners, but yet still accounted for 55% of remodeling spending.
Consumer's spending habits also changed as expenditures on discretionary projects, such as kitchen and bath remodels, fell by 3%, while expenditures on exterior and systems upgrades rose by the same amount. It was also noted that remodeling habits will continue to change as larger, discretionary projects, such as complete kitchen and bathroom remodels, may no longer drive the industry, but rather smaller projects, often to replace older features and systems, will form a larger part of the remodeling market.
The Joint Center for Housing Studies is Harvard University's center for study and information on the housing industry in the U.S. and world. This latest report was the sixth in a line of reports within the Improving America's Housing series.