Languishing Home Improvement Market ‘Poised’ for Rebound: Study

After experiencing a downturn, spending on home improvement may finally register an increase in 2012, with the market appearing to be “poised for a solid rebound,” according to a recent report from the Harvard Joint Center for Housing Studies.

The Joint Center estimates spending on home improvement rose 9 percent in 2012 after falling in previous years. The Joint Center found spending on home improvement and repairs reached $275 billion in 2011, which represents a 4 percent decline from 2009 and about a 16 percent decline from the 2007 market peak.

The report explained the surge in foreclosures and short sales and the high share of underwater homeowners left many borrowers with little incentive to improve or maintain their property conditions.

However, those factors, as well as the growing interest in environmental sustainability, “are now driving a rebound in the home improvement industry,” according to the report.

The study also noted the number of “inadequate” homes has risen, increasing 7 percent between 2007 and 2011 to 2.4 million units. A home is categorized as inadequate if it lacks a complete kitchen or bathroom facilities or running water, and shows other signs of disrepair, according to the report.

“As the broader economy recovers and housing markets tighten, however, some of these inadequate homes will likely be renovated to provide affordable housing opportunities,” the report stated.

In 2011, institutional sellers made improvements to about a third of their foreclosed properties before sale and spent about $6,500 per unit, leading to a market expenditure of about $1.7 billion. Homeowners spent about $11,100 on distressed properties during the same time period, contributing a total of $4.2 billion to market expenditures. Investors spent more on each unit, about $15,600, while contributing about $3.9 billion to market spending. Overall, home improvement expenditures for distressed properties reached about $9.8 billion in 2011.

Aside from improvements to distressed homes, the movement toward “green” improvements, such as increasing energy efficiency, is contributing positively to home improvement spending. The report also noted growth in the population of those 65 and over has potential to lead to a strong demand to retrofit existing homes in the 2020s and beyond.


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