Residential RemodelingResidential Remodeling Market Trends ... · Remodeling Market Overview 1....
Transcript of Residential RemodelingResidential Remodeling Market Trends ... · Remodeling Market Overview 1....
Residential RemodelingResidential Remodeling Market Trends and Outlook
Kermit BakerRemodeling Futures Conference
April 3, 2012
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Remodeling Market Overview
1. Home improvement spending totaled an estimated $290 billion last year; weak house prices and low levels of home equitylast year; weak house prices and low levels of home equity financing still drags on market growth.
2 Recent shifts in the housing stock have increased the importance2. Recent shifts in the housing stock have increased the importance of rental units and distressed properties as sectors expected to generate share gains in home improvement spending.
3. Remodeling activity appears to be recovering, and spending is expected to gain momentum in second half of year.
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With the BuildFax Rebenchmarking, there is Greater Consensus in the Estimates of the Health of the Home
10%
Improvement Market Percent change in Q4-2011 as compared to Q4-2010
7.1%
2 5%5%
10%
2.5%
0%
-2.5%-4.0%
-6.8%
-5%
-10%Census BuildFax HIRI Han-Wood RRI NAHB RMI
Notes: NAHB number calculated as percent below neutral score of 50.Sources: BuildFax Residential Remodeling Index, Home Improvement Research Institute Consumer Sentiment Tracking Study, U.S. Census Bureau C 30 series Hanley Wood Market Intelligence Residential Remodeling Index and NAHB Remodeling Market Index
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Census Bureau C-30 series, Hanley-Wood Market Intelligence Residential Remodeling Index, and NAHB Remodeling Market Index.
Though Still Below Its Peak, Estimated Home Improvement Spending Approached $300 Billion Last YearImprovement Spending Approached $300 Billion Last Year
326350
Improvement and maintenance and repair expenditures (Billions of dollars)
49
52
54 49 49
210229
280 286 280 290
250
300
231274
232 231 2404140
4448
57
149 161180
100
150
200
108 121 136162 172
231
0
50
100
1995 1997 1999 2001 2003 2005 2007 2009 2010 (e) 2011(e)
Owner-Occupied Homes Rental UnitsSources: JCHS tabulations of the 1995-2009 American Housing Surveys (AHS); U.S. Department of Commerce Survey of Expenditures for Residential Improvement and Repairs (C-50); and Estimating National Levels of Home Improvement and Repair
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p p p ( ); g p pSpending by Rental Property Owners by Abbe Will, JCHS Research Note N10-2, October 2010.
Factors Influencing Remodeling SpendingFactors Influencing Remodeling Spending - Sales of distressed homes continue to put pressure on house
prices, and weak house prices are limiting homeowner willingness to undertake improvements;
- Much of the growth in the housing stock is on the rental side;g g ;
- Home energy costs are key determinant of energy efficiency investments but energy prices are very dependent on source;investments, but energy prices are very dependent on source;
- Home equity credit financing continues to decline;
- Construction industry continues to attract new entrants, limiting the ability of contractors to increase the scale of their operations;
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House Prices Remain Weak, and Haven’t Yet Begun to Recover in Many Markets Across the CountryRecover in Many Markets Across the Country…
210
Single-family house price index (Jan. 2000 = 100)
180
190
200
160
170
180
140
150
130
S C L i HPI J 2012
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Source: CoreLogic HPI, January 2012.
…Held Back in Large Part By Sales of Distressed PropertiesProperties
210Single Family HPI
Index Value (Jan. 2000 = 100)
180
190
200 Single-Family HPI
Single-Family HPI - Excluding Distressed
160
170
180
140
150
130
Source: CoreLogic HPI, January 2012.
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Source: CoreLogic HPI, January 2012.
Although Trends are Improving, the Number of Distressed Properties Remains ElevatedDistressed Properties Remains Elevated
5.0L P t D 90 D
Millions of loans (not seasonally adjusted)
3 0
4.0
Loans Past Due 90 DaysLoans in Foreclosure at End of Quarter
2.0
3.0
0.0
1.0
2000 Q1
2001 Q1
2002 Q1
2003 Q1
2004 Q1
2005 Q1
2006 Q1
2007 Q1
2008 Q1
2009 Q1
2010 Q1
2011 Q1
Source: JCHS tabulations of Mortgage Bankers Association, National Delinquency Survey data.
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Net Household Growth in Recent Years Has Been Dominated by RentersDominated by Renters
704.0
Change in Households (Millions) Homeownership Rate (Percent)
68
69
2.0
3.0
671.0
65
66
-1.0
0.0
2003-5 2005-7 2007-9 2009-11003 5 005 00 9 009
Homeowners Renters Homeownership Rate
S JCHS t b l ti f U S C B H i V S
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Source: JCHS tabulations of U.S. Census Bureau, Housing Vacancy Surveys.
U.S. Crude Oil Price Increases are Generating Concerns About Future Home Energy Costsgy
3 00
3.50Dollars per gallon for West Texas Intermediate crude oil
2 00
2.50
3.00
1.50
2.00
0.50
1.00
0.00
S U S E I f ti Ad i i t ti Sh t t E O tl k M h 2012
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Source: U.S. Energy Information Administration Short-term Energy Outlook, March 2012.
However, Over Same Period, New Supplies Have Caused Natural Gas Prices to Fall
12
3 00
3.50Crude oil (left axis)Natural gas (right axis)
Dollars per gallon, crude oil Dollars per thousand cubic ft., natural gas
8
10
2.50
3.00
4
6
1.50
2.00+14%
-42%
2
4
0.50
1.00
00.00
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Source: U.S. Energy Information Administration Short-term Energy Outlook, March, 2012
Home Equity Lending Continues to EaseHome equity lines of credit and loans amount outstanding at end of period
1 13 1 1265.11.5
Home equity lines of credit and loans, amount outstanding at end of period
Levels of home equity loans outstanding, trillions of $ Changes in levels, billions of $
1.13 1.12 1.03 0.95 0.93 0.90 0.89 0.87 50
0.5
1.0
-18.0
0
-0.5
0.02007 2008 2009 2010 2011-1 2011-2 2011-3 2011-4
-65.0 -62.2
-50
-1.5
-1.0Total outstanding ($T)
Change over period ($B)
-82.3-90.6
-97.0-84.5
-100-2.0
S F d l R B d Fl f F d A t Q 4 2011 T bl F 218 d L 218
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Sources: Federal Reserve Board, Flow of Funds Accounts, Q-4, 2011; Tables F.218 and L.218.
Construction Has Historically Been the Sector with the Hi h t R t f E t i l St t UHighest Rate of Entrepreneurial Start-UpsKauffman Foundation Index of entrepreneurial activity; (% of individuals age 20-64 starting a business that month)
1.4%
1.6%
1.8%Construction
Manufacturing
T t l
0.8%
1.0%
1.2%Total
0 2%
0.4%
0.6%
0.0%
0.2%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sources: Kauffman Index of entrepreneurial activity 1996-2011; March, 2012.
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Though Remodeling Industry Became More Fragmented During Downturn, Number of Large Firms g g , gApparently Increased
Number of residential remodeling general contractor establishments with payrolls
EmploymentSize
2003Number
2003Share
2006Number
2006Share
2009Number
2009 Share
4 or fewer 44,414 80.1% 78,800 80.0% 70,918 83.6%
5-9 6,481 11.7% 12,055 12.2% 8,560 10.1%
10-19 2,887 5.2% 5,094 5.2% 3,462 4.1%
20-99 1 406 2 5% 2 288 2 3% 1 507 1 8%20 99 1,406 2.5% 2,288 2.3% 1,507 1.8%
100-499 113 0.2% 162 0.2% 160 0.2%
500 or more 133 0.2% 81 0.1% 247 0.3%
TOTAL 55,434 98,480 84,854
Source: U.S. Census Bureau, Statistics of U.S. Businesses, County Business Patterns Data.
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Recent Changes in theRecent Changes in the Housing Stock
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Almost 15% of the Housing Stock (19 million units) Doesn’t Have a Permanent Occupantunits) Doesn’t Have a Permanent Occupant
Held Off Market, 7 3
Seasonal, 4.5
2011 national housing stock, millions
Owner-Occ,
Vac-for Rent/Sale,
7.0
7.3
75.1
Renter-Occ, 38 438.4
Total housing stock = 132.3 million units
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Source: 2011 U.S. Census Bureau Housing Vacancy Survey.
During Downturn, Net Additions to Housing Stock Heavily Concentrated Among Rental Units; Units Held Off MarketConcentrated Among Rental Units; Units Held Off Market
2.0Owner Rental
Net additions to the housing stock, annual averages, millions
0 10.11.5
Owner RentalVacant SeasonalHeld off
1.27 1 16
1.47
0.3 0.10.1 0.2
0.1
0.1
0.10.3
1.0
1.16
0.9 1.0
0 1
0.7
0 0
0.5
-0.1
-0.5
0.01990-1995 2000-2005 2006-2011
Boom“Normal” Bust
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Source: U.S Census Bureau Housing Vacancy Survey; 2000-2011 figures from revised series.
Rental Market Has Played Key Role in Absorbing Single Family Homes Since Housing BustSingle Family Homes Since Housing Bust
1 41.6
Net conversions from owner to renter occupancy (millions of units)
0 8
1.4
1.01.21.4
0 1
0.6 0.8
0 20.40.60.8
(0.2)
0.1
-0 4-0.20.00.2
Note: All structures also includes attached single-family homes and mobile homes.Source: JCHS tabulations of U.S. Department of Housing and Urban Development, American Housing Surveys, using JCHS-adjusted weights.
-0.41999-2001 2001-03 2003-05 2005-07 2007-09
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Source: JCHS tabulations of U.S. Department of Housing and Urban Development, American Housing Surveys, using JCHS adjusted weights.
Improvement Spending onImprovement Spending on Rental Units
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The Stock Has Been Getting Older, But in Recent Years Th A A f R t l U it H I d MThe Average Age of Rental Units Has Increased More
Median age of the occupied housing stock in years
35 38
3435
40Rental Units
Owner Units
32
29 31
34
30
23
25 25
201985 1989 1993 1997 2001 2005 2009
Sources: American Housing Survey, 1985-2009.
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While Improvement Spending Increased for Owner Units Over the Past Decade, It has Remained Stable for Rental Units
Average annual remodeling spending per unit, $
$3,000
$4,000RentalOwner
$2,000
,
$0
$1,000
$02001 2003 2005 2007 2009 2011
Sources: JCHS tabulations of the U.S. Department of Commerce Survey of Expenditures for Residential Improvement and Repairs (C-50); Value of Private Construction Put in Place (C-30); Housing Vacancies & Homeownership Rates; 2001-2009 American Housing Surveys and Estimating National Levels of Home Improvement and Repair Spending by Rental Property Owners by Abbe Will, JCHS
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Surveys and Estimating National Levels of Home Improvement and Repair Spending by Rental Property Owners by Abbe Will, JCHS Research Note N10-2, October 2010.
As a Result, the Rental Share of Home I t S di H B D li iImprovement Spending Has Been Declining
30%
Rental share of total residential remodeling spending
20%
25%
30%
10%
15%
20%
0%
5%
10%
0%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sources: JCHS tabulations of the U.S. Department of Commerce Survey of Expenditures for Residential Improvement and Repairs (C-50); Value of Private Construction Put in Place (C-30); Housing Vacancies & Homeownership Rates; 2001-2009 American Housing Surveys and Estimating National Levels of Home Improvement and Repair Spending by Rental Property Owners by Abbe Will, JCHS
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Surveys and Estimating National Levels of Home Improvement and Repair Spending by Rental Property Owners by Abbe Will, JCHS Research Note N10-2, October 2010.
Distressed Properties
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Distressed Sales Comprise 35% of MarketDistressed Sales Comprise 35% of MarketDistressed Share of Existing Home Sales Market (Through Jan, 2012)
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Source: National Association of Realtors, Realtors Confidence Index Report, Jan 2012 Edition Based on Data Collected Through February 5, 2012.
At Present, Many Distressed Sales are to I t d Oth Ab t OInvestors and Other Absentee Owners
M t AEst. Number of Single‐F il REO S l t
Share of Single‐Family REO S l t Ab tMetro Area Family REO Sales to
Absentee Owners, 2011REO Sales to Absentee
Owners, 2011
Detroit‐Warren‐Livonia, MI 28,200 75%
Phoenix‐Mesa‐Scottsdale, AZ 18 900 39%Phoenix Mesa Scottsdale, AZ 18,900 39%
Chicago‐Naperville‐Joliet, IL‐IN‐WI 12,000 62%
Las Vegas‐Paradise, NV 10,300 42%
Riverside‐San Bernardino‐Ontario, CA 9,500 31%
Miami‐Fort Lauderdale‐Pompano Beach, FL 7,400 43%
Los Angeles‐Long Beach‐Santa Ana, CA 6,600 30%
Dallas‐Fort Worth‐Arlington, TX 6,300 33%
Houston‐Sugar Land‐Baytown TX 6 200 38%Houston‐Sugar Land‐Baytown, TX 6,200 38%
Sacramento‐‐Arden‐Arcade‐‐Roseville, CA 5,200 36%
Notes: Detached Single-Family homes only. REO sales are defined as the first subsequent arm’s length transaction after the foreclosure. Based on approximately 800,000 detached single-family REO sale closings in 2011.
S P li i ti t f H l W d H i I t lli P D t b
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Source: Preliminary estimates from Hanley Wood, Housing Intelligence Pro Database.
Contractors Report Significant Pre-Sale and Post Sale Expenditures on Distressed PropertiesPost-Sale Expenditures on Distressed Properties
A g Amo nt Spent on RepairClient category Avg. Amount Spent on Repair & Improvement Projects
By banks/institutions/sellers to prepare foreclosed homes for sale $5,100
By households/investors/purchasersafter short sale, homeowner default
or bank foreclosure$7,300
Source: The Farnsworth Group JCHS Green Remodeling Survey of Remodeling Contractors February 2012
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Source: The Farnsworth Group, JCHS Green Remodeling Survey of Remodeling Contractors, February, 2012 .
Fannie Mae Spent Almost $600 Million Preparing Di t d H f l L t YDistressed Home for sale Last YearFannie Mae Foreclosed Property and Repair Spending Statistics
2010 2011
REO Sales 186,000 244,000
Number of Properties Sold w/ Repairs 87,000 90,000
Avg. Repair Spending on Sales w/ Repairs $5,600 $6,200
$487 Million $560 MillionTotal Repair Spending on Sales $487 Million $560 Million
Source: Fannie Mae Repair Spend data, Fannie Mae 2011 Annual Report, and A Report on Fannie Mae’s Mission Activities, April 2011.
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Majority of Pre-Sale Spending: Replacement It d R ti R iItems and Routine Repairs
Repair Item Repair Spending (Millions $)
Share of All Repair Spending(Millions $) Repair Spending
Interior Painting $110.3 26%Carpeting $65.1 15%
Carpentry (Interior/Exterior) $49.1 12%Plumbing $32.0 8%
HVAC $28 9 7%HVAC $28.9 7%Roofing/Gutters $20.9 5%
Appliances - Materials $14.1 3%Electrical $13.2 3%
Other Structural $11.1 3%
Source: Fannie Mae Repair Spend data through third quarter of 2011
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Source: Fannie Mae Repair Spend data through third quarter of 2011.
Total Spending on Distressed Properties Totaled E ti t d $8 5 Billi L t Yan Estimated $8.5 Billion Last Year
No % Sales With Avg Expend Est Total
Distressed Property and Repair Spending Statistics
No. Distressed
Sales
% Sales WithRepairs/
Improvements
Avg. Expend. /Unit
Est. Total Market
Spending
Pre-Sale 1.0 million 37% $6,200 $2.3 billion
Post Sale 1 5 million 57% $7 300 $6 2 billionPost-Sale 1.5 million 57% $7,300 $6.2 billion
Total $8.5 billion
Source: Fannie Mae 2011 Annual Report; 2009 AHS Survey; The Farnsworth Group, JCHS Green Remodeling Survey of Remodeling Contractors, February, 2012 .Note: The share of recent sales with repairs/improvements is based upon responses from owner-occupants who were recent buyers in 2009, and does not adjust for purchasers of REO sale properties who were absentee owners.
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j p p p
Outlook for HomeOutlook for Home Improvement Spending
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Planned Spending on Home Improvements Down Recently But Trend Remains Unusually VolatileRecently, But Trend Remains Unusually VolatileQuarterly averages compared to year-ago level for planned spending
10.4%15%
4.9%7.2%
5.3%
0%
5%
10%
-8.4% 9 2%
-2.3% -3.2% -4.0%-2.5%
-3.8%
-10%
-5%
0%
8.4%
-14.9%
-9.2%
-20%
-15%
Note: Quarterly figures are 3-month averages centered on middle of quarter and normalized per 100,000 responses; Third Quarter 2011 estimate based on July and August data only.Source: JCHS tabulations of the Home Improvement Research Institute’s monthly Consumer Sentiment Tracking Study, Feb. 2008 – Aug.
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2011.
Preliminary Estimates of Leading Indicator of Remodeling Activity Point to Healthy Upturn in Second Half of YearActivity Point to Healthy Upturn in Second Half of Year
Homeowner ImprovementsFour-Quarter Moving TotalsBillions of $
Four-Quarter MovingRate of Change
$122.61.0%
0 2%0.8%
3.8%
0 1%
5.9%
5%
10%
$125
$130
$118.3
$115.7
$111.8 $112.0$113.4
$114.5$112.9
$111.6 $110 8
$114.2 $113.8$115.8
$113.0$113.9
6 %
-4.2%
-1.1% -0.4%-2.2%
-0.2% -0.6% -1.1%0.1%
-5%
0%
$115
$120
$110.8 $110.2
-10.5%
-8.0% -7.6% -6.7%
-15%
-10%
$105
$110
-20%$1002009-
1 2 3 4 2010-
12 3 4 2011-
12 3 4 2012-
12 3 4
US Census Bureau LIRA
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