For consumers, real estate investment is the one positive performer in their investment portfolios. Remodeling maintains and enhances that asset. By Gary Garczynski
For homeowners looking for positive news about their investments, reading the real estate section in the local newspaper has replaced scanning the financial pages. With the existing stock of roughly 120 million homes now valued at $13 trillion and housing values continuing to rise, it's not just a clicheacute; that a home is likely to be a family's most valuable asset.
Steady appreciation in the value of existing homes in recent years and the corresponding increase in equity have given households the confidence and the financial resources to spend money on remodeling. And spending they are. These owners have come to regard home improvements as a solid investment that they can enjoy immediately while looking ahead to increased appreciation when it comes time to sell.
According to the NAHB's Remodeling Market Index, remodeling made a solid rebound in the first quarter of 2002 following a slowdown in the second half of 2001. This year, owners will spend an estimated $167 billion on maintaining and improving their homes. That's a healthy 5 percent increase over last year's record total and is similar to the increases that the NAHB is predicting for remodeling expenditures over the next several years.
In the last 10 years, expansion in the remodeling market has generally been in step with the overall upward trend in new-housing construction, largely dispelling the previously held notion that remodeling is counter cyclical to new construction. With a growth rate of nearly 40 percent during this period, the underlying strength in remodeling has been in bigger ticket items such as kitchen and bath makeovers and room additions, rather than from maintenance and repairs.
Photo: John Hansel
Construction improvements now account for about half of all remodeling expenditures as homeowners look to add living space and up-to-date features such as those found in new homes. These more elaborate and expensive--and generally more discretionary--projects have driven remodeling in recent years, and homeowners are counting on them to increase the value of their homes.
Age in place
Another factor that will have a profound effect on the remodeling market is the aging of the baby boom generation. Now that its 81 million members have started to cross the 55-year threshold, remodelers are preparing to meet the demands of the members of this vast group who often prefer to remain in their existing homes as they grow older.
Recently, the NAHB Remodelors Council launched a new professional designation program to link homeowners of all ages with contractors trained to make home modifications that will allow them to age in place. The Certified Aging-in-Place Specialist (CAPS) program, created with the support of the NAHB Seniors Housing Council, the NAHB Research Center, and AARP, teaches the customer service, marketing, and business management skills necessary to meet the special needs of this rapidly growing market.