Pace of remodeling stays brisk, spending softens
Wednesday, June 12, 2019
Remodeling activity in the first three months of this year exceeded that of the previous quarter, continuing an upward growth trend. Industry projections and homeowner surveys indicate demand for services should remain steady throughout the remainder of the year. However, annual growth is expected to be more modest than in recent years, and homeowners plan to cut back spending on some projects.
For the 28th quarter in a row, MetroStudy’s Residential Remodeling Index (RRI) posted positive growth in the first quarter of 2019, up 0.7% from the previous quarter and 4.1% over the first quarter of 2018.
Although MetroStudy predicts the industry is "poised for growth through the year 2021," it expects the annual rate of growth to slow, to 3.2% in 2019, down to 2.3% in 2020, and then back up again to 3.2% in 2021. Those rates could change, says MetroStudy, depending on how existing home sales, the main driver of remodeling activity, fare.
Following the same trend, the National Kitchen and Bath Association (NKBA) reported strong growth in the kitchen and bath sectors during the first quarter of 2019. Three-fourths of NKBA members participating in its Kitchen and Bath Market Index (KBMI) expressed positive outlook for the coming year, with more than half (56%) expecting conditions to improve in the second quarter.
Findings from several recent surveys of homeowners support that optimism. A study conducted in January by the Harris Poll for home-loan provider LightStream found 76% of homeowners are planning improvements this year, up 26% from the previous year’s poll.
Bathroom (37%) and kitchen (32%) remodels topped the list of most popular projects. On average, homeowners said they planned to spend around $9,000 on all projects, up 32% from the prior year’s poll. The portion of those planning projects of $25,000 or more was up 83%.
Those numbers correspond with the National Association of Home Builders’ (NAHB) latest remodeling by zip code estimates. Its analysis estimates homeowners will spend, on average, $8,327 on remodeling projects this year, with those in larger metro areas likely to spend $11,000 or more.
According to the just-released 2019 Houzz & Home Study, its participants are scaling back on spending this year. Half of homeowners (51%) responding to its survey plan to spend around $10,000 on renovation projects this year, down from $15,000 last year.
The top percentile plan to spend $50,000, down from $80,000 in 2018. The report also notes that in 2018, half of the largest 50 metro areas saw a decrease in median spending, including seven of the top 10 cities that spent the most in 2017.
The Houzz report also indicates that homeowners are shifting their priorities somewhat, putting more of their dollars toward home security, smart technology, and exterior improvements. The proportion of respondents planning renovations dropped from 54% in 2018 to 51% in 2019. Similarly, those planning to spend on decorating went from 60% last year to 47% this year.
Some of the differences among the various reports can be attributed to the respondent mix and the number of options provided in the surveys. For example, another survey of kitchen remodeling trends, conducted by home improvement website Fixr, found nearly three-fourths of respondents (73%) planned to spend between $40,000 and $60,000 on a major kitchen renovation, substantially higher than the median of $14,000 cited in the Houzz study and the $9,000 cited in the Lightstream study.
Taken together, these data points indicate a mixed forecast for the remainder of the year. Overall, industry professionals can expect to see some slowdown in growth and softer spending on projects. However, that will vary by metro and geographic areas. In addition, spending is likely to remain strong among higher-end spenders and those requesting major renovations.
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