Homeowners Aren’t Selling — But They are Improving

Yesterday we started to discuss how several U.S. cities — and studies — indicate remodeling may be rosier than anyone expected.

  • The Sunshine State Swells. In Florida — one of the states hardest hit but the housing decline — the Manatee County Building Department in August reported that 88 percent of its issued building permits were for additions and other home renovations.

Those projects included new pools, fencing, air conditioners, additions — and that number does not include redecorating/remodeling projects that do not require a permit (basically new structures, according to the city of Bradenton) the Bradenton Herald reports. The total actually may be higher.

Are people in the Bradenton/Sarasota/Tampa Bay area actually putting in hot tubs as the foreclosure rate hits an all time high? Really?

According to local builders, yes.

"Many homeowners have realized that perhaps it’s a better idea to turn their eye toward their current home instead of trying to move," Carol Freitag, chief operating officer of Home Forge Remodeling, told the Herald.

Plus with the housing crisis ongoing, labor and materials are often cheaper and more readily available, according to local builders, who reported dry wall, insulation and other materials had "dropped drastically" in price.

  • Wichita Wants Updates. In Wichita, Kan., the number of residential remodeling permits issued through September was up 2 percent and permit value was up a whopping 20 percent compared to the same period in 2006, according to Wichita’s Office of Central Inspection.

The local remodeling market has grown steadily in recent years, and appears to be continuing to, with local builders reporting no slow-down the Wichita Eagle reported this weekend.

Moving Forward

And yet, the Leading Indicator for Remodeling Activity (LIRA), a new initiative developed by Harvard’s Joint Center for Housing Studies (which replaces the Remodeling Activity Indicator), predicted in October that remodeling spending essentially will be flat for the next three business quarters, according to the Chicago Tribune.

And what about companies like USG Corp., the Chicago-based maker of building products that reported a 95 percent drop in third-quarter earnings recently? Its CEO blamed the softening residential repair and remodeling sector, according to the Trib.

It seems for every good news item, there is a bad one: And homeowners are taking note. A LIRA study found that they still felt improving their homes was a good investment; what they were not sure about was whether or not improvements would increase value. 

Perhaps that’s why Freddie Mac reported it expects the volume of cash-out activity to decline by roughly a third later this year.

Whether or not homeowners are renovating to improve the only home they feel they will be able to afford living in for awhile or because they believe the market will soon turnaround and they’ll be able to sell it, the remodeling industry may profit. They may also stay busy: About 67 percent of remodelers believe revenue will increase or be stay steady from 2006, according to Home Tec.

It’s hard to say whether homeowners or remodelers are more on the money. It’s also hard to say whether the former will spend it and the latter will get it.

But whichever way remodeling swings, it’s going to have an impact. Homeowner remodeling accounts for more than 2 percent of the overall economy in this country, according to Harvard’s Joint Center for Housing Studies.

We’ve all been carefully watching consumer spending, auto sales and other economic indicators for months. So doesn’t the suggestion that the remodeling industry may weather the housing decline feel like a tiny bit of good news? There’s hope in those new hot tubs — really.