Makeovers: The Remodeling Outlook 2010
Homeowners have been reluctant to take on remodeling projects since Q-1-2006. Both major and minor additions and alterations are down, including maintenance and repairs, says the Quarterly National Home Builder Association Remodeling Index.
Remodelers are reporting fewer calls for bids, fewer jobs committed for the next three months, a lower backlog of remodeling jobs, and fewer appointments for proposals.
A weak economy, job losses, low consumer confidence, and reluctant lenders are the leading factors keeping homeowners from making improvements to their homes.
But there are also incentives to remodel. Many builders have diversified into remodeling, providing a ready and experienced labor force. “Green” remodeling is sweetened by government rebates and guaranteed conforming loans such as the FHA 203K. The Home Buyer Tax Credit, now extended to some move-up buyers, is encouraging buyers and sellers to update older homes.
That means the opportunity for homeowners is significant, because the window before business picks up again is closing fast. The NAHB expects owner-occupied home improvements to soar from approximately $100 billion in 2010 to nearly 120 billion by mid-2011, about the same amount spent in 2003 at the beginning of the last housing boom.
To put those numbers in perspective, the height of the remodeling boom was in 2006, with owner-occupants spending approximately $150 billion on home improvements.
Among other reasons to invest in home remodeling – home prices are stabilizing, and should rise modestly by the end of 2011.
Home prices are as close to the average price-to-income as they’ve been since 2001.
The unemployment rate is expected to steadily fall through 2011 to about 8.75%.
About 66% of home builders plan to diversity into residential remodeling in 2009 and 2010, providing an experienced and available labor force.
In the first year after buying an existing home, homeowners spend approximately $4,642 on improvements, a little less than twice what a non-moving homeowner spends on updates.
Total remodeling costs are going up, not down. According to the Cost vs. Value Report produced by Remodeling Magazine, costs are up a little less than 2% annually.
The prices of some commodities are down including lumber (down 14%) and drywall (down 45%.) Petroleum based products and branded products are up. Asphalt shingles, for example, are up 40%. Some manufacturers have cut back on production in order to raise prices.
Costs recouped at resale are estimated to be 63.8%, which is down from the high of 86.7% in 2005. However, with the slowdown in new building and the housing price recovery anticipated in 2011, home improvements are likely to add more value to existing and new homes in the future.
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Blanche Evans is CEO of Evans Emedia, Inc. and publisher of The Evans Ezine. As an award-winning journalist, Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and twice recognized as one of the industry's most "Notables."
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