Is the Housing Crisis Causing a Home Improvement Crisis?

Depressed home values have many experts in the home improvement industry nervously watching for any similar trends that may emerge. The U.S. Census Bureau has already recorded a 12.4 percent drop in the home remodeling industry for the second quarter of 2008. Major home remodeling aside, other areas of the home improvement industry are showing remarkable signs of resilience.

The Home Improvement Recession

Kitchen and Bathroom Remodeling: No Longer the Bread and Butter?
Although kitchen and bath remodels still comprise a huge portion of the home improvement industry, there is no longer any doubt that the housing crisis has slowed homeowners' funneling of their home improvement budget into these optional projects. More and more homeowners are waiting for their home values to rebound, so they can judge the resale value of these remodels. According to Remodeling Magazine's 2007 Cost vs. Value Report, the average kitchen remodel returned only 83 percent of its cost, compared to 92.9 percent in 2004. The average bathroom remodel returned 78.3 percent of its cost, compared to 90.1 percent in 2004. Moreover, the middle of this past decade saw a rise to the myth that home remodeling essentially paid for itself, a myth that led to some people remodeling themselves right out of their homes.

Flooring: Has it Hit Bottom Yet?
Flooring is something that is easy for many homeowners to put off. Carpets that are nearing 10 years of age are probably ready to be replaced, but homeowners convince themselves the grime of worn-down fibers can be steam cleaned one more time. Or, as much as they hate it, they've resigned themselves to living with linoleum for yet one more year. Laminate flooring has seen the most precipitous decline at 14 percent, while wood flooring has actually grown by 8 percent over the previous year. Possibly, this reflects a post-hype dip in the appeal of laminate flooring over solid wood floors.

Meanwhile, while the investment value of remodeling has been exaggerated for many years, some projects are nevertheless undeniably worth the cost. This is what one Milwaukee homeowner said who completed a $6,000 hardwood flooring installation, "In terms of replacing carpeting with hardwood flooring, I would go ahead and do it because it will add value to your home and make it more inviting and warm."

Windows: A Sober View of Home Improvement
Replacement windows are also experiencing a significant downturn this year. SM reports a 10 percent drop off. Part of this particular trend may be explained by a partial saturation of previous window replacement. Homeowners who already have double-paned windows, even if these windows are 10 or 20 years old and are showing some wear, are less likely to foot the bill for a new complement of energy-efficient windows. Perhaps even more telling, while window replacement has dropped, window frame repair and window glass replacement has risen by almost 20 percent over the last year, possibly indicating fewer and fewer homeowners are using damaged windows as an impetus to complete a replacement window project.

That said, if you're in between replacing one window or your whole house, you would be right to suspect that the better value lies in doing it all at once. This Atlanta homeowner, who spent $300 replacing a broken window pane said, "Since I only had one window replaced, the cost was higher than if you have multiple windows. You should get the most for your money."

Resilient Home Improvement Projects

HVAC: The Unchanging Seasons
Heating a home during the winter and cooling it during the summer are necessities and less subject to the expendable income of a homeowner's pocket. Most of the resilient home improvement projects fit into this category. Moreover, regardless of the condition of the housing market and the economy in general, most people wait until their furnace or air conditioner fails before making repairs or upgrades. Both heating and cooling systems saw a strong 10 to 15 percent growth in the past year. Most notably, furnace repairs went down 36 percent while furnace installation stayed constant. Meanwhile, solar water heater, heat pump, geothermal systems, even boilers all increased, showing that more and more homeowners are turning to alternative heating systems. In contrast, nearly all the growth in cooling systems took place with conventional air conditioning replacement.

Roofing: Shelter from the Storm
The roofing industry, in general, appears well insulated to storm any downturn in the home improvement industry. While some specific roofing projects, namely rubber roofs and traditional tile, have seen declines in the past year, asphalt roof installation is up 19 percent and asphalt roof repairs are up 13 percent. It's easy to assume that roofing installation and repair projects have stayed constant simply due to the necessity of keeping a roof over your head. Some high-end roofs, however, have also shown growth. The new star of the roofing industry, metal roofing, is up an eye-catching 17 percent. One homeowner from Kansas City had this to say after installing a metal roof, "My roof sets off the rest of my home. My husband commented that he had never seen anyone so excited about a new roof! It looks great."

Decks: No Longer on the Outside Looking In
Deck installation has increased by about 21 percent this past year. Three things have likely conspired to make decking projects more desirable to homeowners. First, the housing crisis has made it difficult to impossible, and certainly undesirable, to move into a new, larger home. As a contingency plan, many homeowners are expanding their current homes, using a deck to increase their living space. Second, as a more reasonably priced home improvement, it stands to reason that decks are siphoning off some of the dollars that had been going to kitchen, bathroom, and basement remodeling. Finally, like oil, lumber prices have dropped precipitously, making the primary material for new decks substantially cheaper.

The Forecast for Homeowners and Contractors
"Demographics are destiny." According to the Joint Center for Housing Studies, the Baby Boomer offspring, the "Echo Boomers," should be hitting their peak for housing demand and remodeling during the middle of the next decade. Coupled with a rebounding economy, these demographics point to a nearly unparalleled surge in the home improvement industry, especially as the U.S. housing stock continues to age. Many home improvement contractors are just trying to survive. For homeowners, don't assume that depressed housing values make home improvements unwise. Perhaps the most important piece of the equation is feeling secure with your mortgage, your employment, and your ability to afford any improvements you make. You never want to put yourself in financial straits, but enhanced enjoyment of your home, whether it's from a new bathroom or kitchen, lower utility bills, or a beautiful deck, is something no economic conditions can take away from you.

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