Kitchen & Bath Design News

JAN 2015

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January 2015 ForResidentialPros.com | 77 "Remodeling expenditures tend to trail home sales as home sellers undertake improvement projects to prepare for the sale and buyers un- dertake projects to put the fnishing touches on their new acquisition, says Bob Denk, senior economist at the National Association of Home Builders. "Expenditures have been weak in the second half of 2014, re- fecting the weakness in home sales in the frst half of the year. But the outlook for remodeling expenditures going forward is brighter based on the recovery in home sales we've seen take place in the second half of 2014." "Fundamentally, [the recovery] will rely on what happens in the economy and with housing prices," Baker says. "If we started to see 300,000 new jobs, lower unemploy- ment, [increased] home sales and a loosening of home equity lines, we could see signifcant economic im- provement." A lingering question is whether banks will loosen their hold on home equity loans, as well as mortgages in general. Both housing and remodeling are continuing to score double-digit gains, as they did in 2013 and 2014, and that trend is expected to contin- ue. While property values are rising, many homeowners remember the days when their houses were worth a lot more than they are now. "For many folks, their house isn't worth as much [as it was before the recession]," Baker says. "They're not feeling as wealthy and are re- luctant in this market to make big improvements." "There's a trend toward homeown- ers staying put," adds Stapperfenne, CKD, CBD, and Division Manager of Tewksbury Kitchen & Bath in New Jersey. "Rather than moving into new properties, homeowners are keeping their current residences and remodeling to get the space that they want in the space that they have. It's great to see that, in many instances, homeowners are partnering with a professional to ensure the best value and best design to suit their lifestyle, rather than the lowest price." Baker expects the low and middle end of the industry to continue to see growth. Home improvement spending in 2014 will exceed $300 billion and, in 2015, surpass the 2007 high-water mark for spending of about $328 bil- lion. The fgure is not adjusted for infation, but would refect a $100 billion increase over the 2011 fg- ures recorded in the depths of the downturn, according to Baker. "That's a good sign," he says. "The pieces are coming back diferentially." In the peak of the recession, the discretionary market – the big ticket remodels – were the hard- est hit portion of the kitchen and bath industry. That was at a time when even necessary home fxes such as windows and roofng were somewhat slumping. The non-dis- cretionary market was saved, in part, by tax incentives and a federal energy tax credit. But now, "with the last year, we're seeing the discretionary spending starting to improve because there is less fear out there," Baker explains. While the high-end projects may not come roaring back right away, Baker said the middle-tier projects – the $40,000-$50,000 jobs – are expected to see most of the growth. "It made sense to invest in a house when it was going up in value at 6-7 percent annually," Baker says. "Back then the improvements were fnanced, but now it's harder to get a home-equi- ty loan and that hasn't changed. Now it means a homeowner needs to take $10,000 out of savings to do the job, and some people will be reluctant to do that just yet, given the general un- certainty about jobs and the economy." Banks are still feeling the impact of the bursting of the housing bubble. Baker notes that the banks continue to be under scrutiny for their loan FORECAST FOR NEW SINGLE-FAMILY HOMES (Thousands of Units) 2010 471 2011 434 2012 537 2013 621 2014 641 2015 804 2016 1,102 Source: National Association of Home Builders FORECAST FOR EXISTING HOME SALES (Thousands of Units) 2010 3,705 2011 3,793 2012 4,130 2013 4,471 2014 4,358 2015 4,691 2016 4,753 Source: National Association of Home Builders

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