In the wake of the worst downturn in recent history, the U.S. home improvement industry is poised for growth, according to a report released Jan. 13 by the Joint Center for Housing Studies at Harvard University.
"A New Decade of Growth for Remodeling" is the sixth and latest report in the Improving America's Housing series, published by the Remodeling Futures Program at the Joint Center.
"As both the economy and the housing market stabilize, so too will homeowner improvement spending," says Abbe Will, a researcher with the Remodeling Futures Program, in a news release.
During the coming years, remodeling expenditures are expected to increase at an inflation-adjusted 3.5 percent average annual rate, below the pace during the housing boom, but sharply recovering from the recent downturn.
The industry, which saw a double-digit decline since its peak in 2007, is beginning to return to a more typical pattern of growth. Market fundamentals - the number of homes in the housing stock, the age of those homes and the income gains of homeowners making improvements - all point to increases in remodeling spending.
"Metropolitan areas with rising house prices, older housing stocks, higher incomes and home values, and a larger share of upscale remodeling expenditures, such as Boston, San Francisco and Los Angeles, are well-positioned for an upturn in remodeling activity," says Eric Belsky, managing director of the center.
In the next five years, the focus of remodeling spending will shift from upper-end discretionary projects to replacements and systems upgrades. Remodeling contractors have a number of growth opportunities generated by underinvestment in distressed properties, lower mobility, changing migration patterns, and the rise of environmental awareness.
"Lower household mobility following the housing market crash means that in the coming years, homeowners will increasingly focus on improvements with longer paybacks, particularly energy-efficient retrofits," says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. "Also, a slowing of migration to traditionally fast-growing Sun Belt metro areas means that, at least temporarily, more remodeling spending will remain in older, slower-growing areas in the Rust Belt and in California."