When it comes to remodeling, the Baby Boom generation will keep on booming. And they'll be followed by spendthrifts known as GenXers.
While the new construction market is slowin', the remodeling sector will keep on growin', according to experts at the National Association of Home Builders' convention in Orlando last month.
"Boomers aren't done in terms of remodeling activity," said William Apgar, a former federal housing official who is now senior scholar at Harvard's Joint Center for Housing Studies.
Normally, spending on remodeling tends to fall off when home owners reach age 50. And by age 70, they're down to "doing only basic stuff," Apgar told a press briefing.
But the huge Baby Boom generation, members of which begin turning 60 this year, have been spending twice as much as the 50 to 70-year olds that have come before them, he pointed out. And there's no reason to indicate they are likely to stop.
Boomers "are outspending their predecessors, and that's likely to continue," the former FHA Commissioner said. "And when that generation finally does begin to tail off, pretty active GenXrs are coming right behind them. So there's not going to be any substantial fall off in remodeling activity far into the future."
According to the Joint Center, total remodeling activity reached $233 billion in 2005, representing about 40 percent of the giant construction market. But growth in the sector should tail off from some 20 percent as recently as 2003 to about 4 percent annually this year.
Even at the lower rate, said Kermit Baker, who directs the Center's Remodeling Futures Program, the remodeling portion of the market will be stronger than new construction.
Home improvement spending by home owners grew by 4.5 percent last year, with owner-occupants investing $149.5 billion in their homes, Baker reported.
Although rising short-term interest rates and slower price appreciation has tempered owner spending, he said, the home improvement market "continues to be a major sector of our economy."
Gopal Ahluwalia, staff vice president of research in NAHB's economics group, is expecting spending on remodeling to grow by about 5 percent annually for the foreseeable future.
Despite the recent refi booms, he pointed out, owners still have $10 trillion in equity left in their homes, and they'll spend lots of it on their houses in an attempt to keep up with the Joneses.
"As home prices rise, owners want to improve the value of their real estate," Ahluwalia said. "They'll want larger homes and better features as they try to keep up with the new houses that are being built bigger and better every year."
"We call it 'selective luxury,'" Apgar told reporters. "Even though people are facing higher housing costs when they do buy and renovate, they are more likely to buy expensive items."
Unlike the slowly consolidating home building market, where giant national builders continue to take an ever larger share of the market, remodelers are not merging. In fact, just the opposite is true, Baker reported. Instead, they are gravitating away from being companies which provide a full range of services to large scale specialty contractors.
The days of one company buying another are number, he said. "We're seeing more and more large, specialty contractors with much higher profitability."