Early indicators signal mixed recovery for remodelers
Wednesday, May 13, 2020
When the economy begins to regain momentum, will demand for remodeling services bounce back? Or, will homeowners proceed more cautiously for some months, waiting to see if conditions improve and the housing market stabilizes?
Industry analysts in recent weeks have proposed both scenarios. At present, a third scenario seems more likely, that some homeowners will want to move ahead with projects right away, while others will choose to wait.
Predictions of what the future holds for remodelers in the coming months varies somewhat by sector. As reported by Kitchen & Bath Design News, officials at the National Kitchen & Bath Association (NKBA), in conjunction with its research partner John Burns Real Estate Consulting, foresee a quick rebound for the residential remodeling industry once homeowners allow design professionals and contractors back into their homes.
Analysts at the Joint Center for Housing Studies of Harvard University (JCHS) offer several positive indicators, cited in the article, to support the quick rebound scenario. After being required to stay in place for weeks, homeowners have had plenty of time to think about the changes they want to make to their homes.
Home values are still high and interest rates are low, making it easier to borrow to fund projects. Anticipating what the “new normal” may be like, homeowners will be in a “cocooning” mode and want to improve health and safety features in the home.
Across the country, local news outlets in various metro areas have run stories on how homeowners and remodelers have adjusted to keep major remodeling projects moving forward. The latest NKBA member Pulse Survey shows a gradual increase in demand for goods and services over the past three weeks, including among designers. Similarly, the most recent ASID COVID-19 Pulse Survey, from the American Society of Interior Designers, finds professionals’ concerns easing somewhat, with fewer experiencing a significant negative impact on their work as a result of the measures to contain the pandemic.
For many contractors, however, the outlook is not so positive. More than 9 in 10 respondents to the National Association of Home Builders (NAHB) first quarter 2020 Remodeling Market Index (RMI) survey said the coronavirus health crisis has had a noticeable, adverse effect on homeowners willingness to remodel at this time and on the rate at which they are receiving new inquiries. Close to three-fourths (70%) rated the negative impact as major rather than minor.
New projections of annual homeowner remodeling spending in 50 major metro areas, from the Remodeling Futures Program at JCHS, forecast that nationally expenditures will contract in a majority of them this year. Less than a third are expected to see annualized gains, and those of between 1 and 3%. Research assistant Sophia Weeden stated, however, that some metro areas should fare better than others, particularly those in in the Midwest and the Sun Belt.
What emerges from this data is a picture of a mixed recovery in which wealthy and more affluent homeowners who have not been significantly disadvantaged financially by the crisis will want to continue, restart or undertake new remodeling projects, while those of lesser means and/or whose livelihoods have been impacted will put off renovations until their circumstances have improved. Even so, those who anticipate a “quick” recovery believe it will be many months, perhaps some time in the fourth quarter, before business levels return to something like normal.
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