Steady Growth Projected for Nation’s Remodeling Industry - 11/1/2004 - Mortgage Loan Refinance Debt Equity

Steady Growth Projected for Nation’s Remodeling Industry Over the Next Few Years

Annual remodeling activity has grown strongly over the past decade, rising from $153.1 billion in 1995 when economists first started tracking the industry, to $233.3 billion at the end of last year, Baker said, but it still remains significantly behind the $350 billion spent on new housing last year.

Home owners spent an estimated $129.3 billion on home improvements and repairs over the past three quarters of this year, he said, which is a 5.1% increase over the same period of 2003.

Home improvements accounted for $138.1 billion of remodeling activity last year, and $60 billion of that amount was spent on interior space additions and alterations, including upgrades for kitchens and baths.

Cities where the remodeling business was especially brisk last year, he reported, were: Washington, D.C.; Philadelphia; Portland, OR; Phoenix; Los Angeles; San Francisco; Sacramento, CA; Pittsburgh; San Diego; Chicago; Kansas City, MO; Dallas; Tampa, FL; and Miami.

The industry is being helped by the country’s rapidly aging housing stock, Baker said. Homes built in the 1970s are accounting for a large share of the remodeling market as they hit the typical 25-30 year life cycle in which improvements start to be needed.

Spending at the higher end of the marketplace is also supporting growth, he said. The number of households spending $25,000 or more annually on remodeling doubled from 16% in 1995 to 31.2% last year. Still, 52% of spending by home owners was in the lower $10,000-$25,000 range.

When it comes to remodeling, immigrants have caught up fast with native-born home owners, according to Baker, and Hispanic households are leading the current surge in home improvement spending. That trend will only intensify as minorities increasingly become home owners; they are expected to account for nearly half of the increase in the home-owning population by 2015.

Across all racial lines, post-World War II baby boomers dominate today’s market, accounting for a 52% share, he said. Their contribution is projected to decline to 44% of the remodeling market by 2015, but they still won’t be overtaken by Generation Xers born from 1965-1974 and the Eco Generation that started in 1975.

Photo by Morris Semiatin