The Joint Center for Housing Studies of Harvard University released its “State of the Nation’s Housing 2012” report on June 14. And it contains some good news: “Starting in the first quarter of 2011, home construction and improvement spending have made a positive contribution to GDP in four out of five quarters. ... [T]he Leading Indicator of Remodeling Activity (LIRA) points to a resumption of spending growth in the second half of 2012.”
But the economy and housing are still in trouble: real net household wealth has decreased and National Association of Realtors member brokers continue to report high rates of mortgage contract failures.
There are opportunities for remodelers, however. Despite a decline in homeownership rates, the population of those aged 65 and older has an 81% home ownership rate. “Who has done better during this downturn?” asks Kermit Baker, a senior research fellow at the Joint Center. “Seniors clearly have. They didn’t buy during the peak of the market. They’ve owned for quite a while. They were able to ride up the market, and the downturn has eroded only some of their equity. The other group that has done well is upper income. There are clear implications for remodeling in terms of niches.”
There are two other areas remodelers should pay attention to — distressed housing stock and rental stock. “Two million homes are in foreclosure and another 1.5 million are in danger of foreclosing,” Baker says. “We’ve estimated that fixing up a distressed property added about $8 billion to $10 billion to home improvement spending in 2011.” And many people who couldn’t buy have been renting and will continue to rent — but those homes, too, will need improvements.
Overall, Baker believes that housing has reached bottom in most places across the nation and that prices are stabilizing. “Things are starting to turn in the other direction, but it’s slow,” he says.
—Stacey Free, senior editor, REMODELING.
(For more information on consumer segmentation, see Top 100 Markets; see RRI Local Market Reports for consumer data by ZIP code.)