Despite a weak 2014 performance, residential remodeling is poised for moderate growth in 2015 and beyond, according to a panel of leading remodelers and industry experts speaking at the International Builders’ Show (IBS) in Las Vegas.
The National Association of Home Builders (NAHB) Remodelers, which hosted the press conference, projects residential remodeling spending on owner-occupied single-family homes will increase 3 percent in 2015 and another 1.5 percent in 2016.
Residential remodeling spending fell 5.4 percent in 2014 because of downturns in two key drivers, which have been reversed and are unlikely to be repeated, said Paul Emrath, vice president of survey and housing policy research for NAHB.
Reduced house prices and sales slowed business
“Existing home sales and house prices both hit soft spots in 2014 that dealt a glancing blow to residential remodeling businesses,” Emrath said. “We expect those drags are behind us in 2015, an outlook consistent with the optimism expressed by remodeler members in our recent Remodeling Market Index (RMI) survey.”
Existing single-family home sales declined in early 2014 but recovered to 4.5 million by the end of the year, according to NAHB. The association expects them to jump by 7.4 percent in 2015, followed by 1.9 percent in 2016.
House prices plummeted toward the middle of 2014 but recuperated in time for the second half of the year, according to the S&P/Case-Shiller Home Price Index. NAHB estimates prices will increase by 2.9 percent in 2015 and another 3.3 percent in 2016.
Survey reports improved market activity
NAHB forecasts are consistent with the widespread sentiment of remodelers that things are improving. The RMI, a quarterly survey of professional remodelers that asks whether conditions have gotten better or worse, hit a record-high result of 60 in the fourth quarter of 2014.
An RMI above 50 indicates that more remodelers report market activity is higher (compared with the previous quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity. Both current remodeling activity and indicators of future activity reached a respective score of 60 in the fourth quarter of 2014.
The RMI also showed that bathroom and kitchen remodels remained the most common jobs in 2014, with bathrooms edging out kitchens 78 percent to 77 percent.
Robert Criner, president of Criner Remodeling in Newport News, Virginia, said those job rankings held true for his company last year, and that the final two quarters of 2014 were the best in the past five years.
Remodels include more accessibility designs
He also said Criner Remodeling has been incorporating more universal design concepts for its clients. “We’ve done more accessibility in the last three years than we did in the last 10,” he added.
Design concepts such as barrier-free showers ensure owners can stay in their homes longer, and come in handy if they have to take care of a parent. They can boost the resale value of a house as well.
Although Criner has encountered many more “bump outs” than full-scale additions in the past year, whole-house remodeling became more common in 2014, at 43 percent of jobs, according to the RMI.
Location change made all the difference
Mike Nagel, partner in the remodeling company MAW Chicago, based in Palatine, Illinois, saw the average size and value of MAW’s jobs skyrocket after the company began working exclusively in the city of Chicago.
“From about 2008 to the early part of 2012, we did not have a single lead in the suburbs,” Nagel said. The average value of a job in the suburbs was about $120,000 while one in the city is anywhere from $380,000 to $2.8 million, he added.
Nagel also said he has noticed specific trends in the remodeling market, including home tech centers, increased home automation and more opportunities for customization.
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