When a fresh coat of paint is not enough, there is remodeling. It might be a new roof or a new room. It might be because your house is falling apart or because you can’t believe you once thought those aqua blue cabinets and plaid backsplash* was a good idea. Regardless, remodeling is a huge part of the housing market.
But after the pandemic boom what is in store for the remodeling sector? Will it be an alternative to buying for those “locked in” by a low mortgage rate? Which parts of the remodeling business are most recession-proof and which might be most impacted by the slowing housing market? What are the “can’t wait” remodeling projects? What can we let slide?
Eric Finnigan of John Burns Real Estate Consulting is a thought leader in the remodeling space. Let Eric walk you through the basics, the nuances, the future, the economics, and even the demographics, of the remodeling world.
Here is a taste of what we cover in our latest New Home Insights podcast:
Eric Finnigan, Vice President of Research and Demographics, John Burns Research and Consulting
We're talking big
- Remodeling is a really big deal. For every home sold there are 10 to 12 remodeling projects, that is, some 65 to 70 million each year.
- Here is another way to think about it: almost one-third of homeowners do something to improve their home about every year. That translates into total dollars spent on remodeling well in excess of home sales revenue.
- Remodeling can be a hedge against the housing cycle, but, ultimately, the more flush with equity homeowners are, the more remodeling dollars they will be willing to spend.
Another COVID impact
- Remodeling boomed post-COVID outbreak as homeowners sought to improve the spaces they were now spending so much time in.
- That boom is starting to wane. Remodelers are still often booked out for months, but the forward-looking indicators are softening.
- As home prices take a hit so will the ability of homeowners to borrow against their home values to fund those big remodeling jobs.
The look ahead
- A JBREC / Qualified Remodeler remodeling index that he manages and has helped design allows him to keep a finger on the remodeling pulse. What do remodelers expect over the next year in terms of deal flow and demand?
- Eric expects the luxury sector to hold up. DIY jobs, conversely, were pulled forward so will ease over the coming year. Overall, Eric expects the sector to slow.
- One of the ways homeowners more generally are handling the new normal in housing is to scale back their next remodeling job. What might have been a $100K check becomes a $20K outlay, but they still get to feel good about the new “statement” cabinetry in their kitchen.
- More time spent in the home means more dollars spent on the home—so keep an eye on how the remote work revolution plays out.
- Ultimately, remodeling will move with the economy, but its sheer size will always make remodeling unwise to ignore.
*Is a plaid backsplash really a thing? It is now.