Home Improvement Sector Struggles Along With The Rest Of The Market
No matter how industry insiders try to look at and examine the data, the fact still remains that we are in the midst of a housing market slowdown, and it’s apparent in all aspects of the industry.
For the most part, there is a surplus of homes for sale and available just sitting on the market, and prices seem to be declining or at least stagnant in most areas. Although there are a few specific area that are stills seeing some price appreciation.
With all of that said, one other area associated with the hosing market that most people would not necessarily expect to slowdown during this time is the home improvement industry.
This is probably because money is already tight for many homeowners, and most do not want to take any cash-out of their home to finance these projects because they are worried that their home’s value could go down and then they could end up owing more than there house is even worth.
A February 8, 2007 article by Amy Hoak of MarketWatch, “Many home improvements on hold as owners await better times,” discusses how many homeowners are waiting for the market to improve before they embark on any major projects.
“New-home construction isn't the only segment of the home-building industry facing tough times. Home remodeling is also in the midst of a slowdown, according to a report released Thursday. Many homeowners have simply put their improvements on hold, waiting for the market to stabilize, said Kermit Baker, director of the Remodeling Future Program at Harvard University's Joint Center for Housing Studies. He spoke at the International Builders' Show here.”
It seems as if pretty much anyone even remotely involved with the housing industry is just sitting on their hands waiting for the market to get better and pick up the fast pace we saw just a few years ago.
Less home appreciation is one key factor that is slowing the home improvement industry.
“‘And we've seen less house-price appreciation,’ he said. High appreciation in past years allowed homeowners to extract home equity to pay for remodeling projects, and lower financing costs made the prospect of remodeling more affordable. The promise of a high return on investment was also an incentive, he said. But the study, ‘Foundations for Growth in the Remodeling Industry,’ doesn't project the remodeling drought to last long.”
Most say that the industry will start to see growth again in a few years.
“Although 2007 should be relatively flat in terms of remodeling spending, the market is expected to pick up again over the next several years, Baker said. Spending on remodeling projects reached $280 billion in 2005, according to the report. Homeowner spending on remodeling projects is projected to increase 44% between 2005 and 2015.”
This sector of the housing market has traditionally done better than the home building industry because there is more variety and services that can be done.