A major new report underscores the growing
importance of home remodeling to the nation’s economy, while
providing insights into the factors fueling continued kitchen and
bath industry growth.
By Elliot Sefrin
LAS VEGAS The nation’s residential remodeling industry including
its substantial kitchen and bath component is becoming increasingly
important to the nation’s economy and also to enhancing the wealth
and quality of life for homeowners. At the same time, though,
remodeling is an industry, which remains, in a very real sense,
largely in the shadows and whose significance fails to be
recognized by most government analysts and economists.
That’s the conclusion of a major new report which
contends that homeowners’ increased spending on home improvements
played a pivotal role in preventing the U.S. economy from slipping
further into recession during the recent economic downturn.
The report, whose findings were released during
January’s International Builders Show (IBS) in Las Vegas, was
conducted by Harvard University’s Joint Center for Housing Studies.
It was sponsored in part by the Taylor, MI-based Masco Corp., the
parent company of many major building product manufacturers,
including Merillat Industries, KraftMaid Cabinetry, Delta Faucet
Co. and others with important ties to the kitchen and bath
The report concluded that expenditures aimed at improving,
maintaining and repairing the nation’s 119 million homes led by
strong demand from high-income households and buoyed by steadily
rising home prices totaled some $214 billion in 2001, the latest
full year for which figures are available for study.
That figure also represents more than 2% of the
nation’s total economic activity, the report noted. Furthermore, it
is the highest dollar amount ever reported for the U.S. residential
remodeling market, whose exact size has proven rather difficult to
Yet, despite its enormous size, “home improvement
activity is a ‘stealth’ industry, flying way below the radar screen
of most macro-economic analysts,” said Kermit Baker, director of
the Remodeling Futures Program of the Cambridge, MA-based Joint
Center for Housing Studies.
Baker noted that the remodeling industry is far
larger, for example, than other, better-studied industries,
including retail clothing sales ($169.1 billion), legal services
($133.5 billion) and commercial construction ($131.4
“The importance of the home remodeling industry to the U.S. economy
cannot be overstated,” he observed.
The Joint Center report, one of two to be released at the IBS
event, contains positive news for the kitchen and bath industry. It
also contains key insights into an industry whose growth is based,
in large part, on the overall vibrancy of the housing market, as
well as on such factors as household composition, existing-home
sales, an aging housing stock and current financing conditions.
Among the key findings of the report are the
The vast majority of remodeling activity completed
in the U.S. each year is accounted for by homeowner improvements
that is, discretionary expenditures aimed at addressing changes in
lifestyle, status and family composition as opposed to routine
maintenance and repairs of the home. That is a sector that also
includes kitchen and bath remodeling.
At the same time, the percentage of total remodeling expenditures
accounted for by high-income, high-spending households has
increased significantly in recent years as well. In fact, the 6.3%
of owners who spent $20,000 or more on home improvements accounted
for almost half of the 2000-2001 total, while the 2.7% of
households spending $35,000 or more accounted for over one third
(see Graphs 1 and 2).
Households spend the most on remodeling within the
two years of buying a home. Homebuyers, on average, spend more than
twice as much as non-moving households; at the same time, trade-up
buyers spend about 50% more than first-time buyers (see Graph 3).
Because of this, the current record level of new- and existing-home
sales is a prime factor for the growth found in an already robust
remodeling market, the report reveals.
Aging baby-boomers concerned with the quality and
usability of their homes are considered more inclined to hire a
professional remodeling contractor for their home improvements (see
Hispanics pace the growth in home improvement
spending. In fact, minorities represent a growing share of
homeowners, and consequently, of home- improvement spending. As the
report reveals, minority spending on home improvement has been
growing at almost twice the rate of white households. Also of note
is that, since 1995, home-improvement spending by Hispanic owners
increased by an impressive 78%.
Remodeling activity is concentrated. In fact, the
top 10 metropolitan areas for home- improvement spending account
for more than 30% of total home improvement expenditures.
According to the report, the remodeling share of
total residential investment has been growing steadily. Nationally,
remodeling accounts for about 40% of total residential investments.
In the northeastern U.S., where homes are older and construction
opportunities are perceived as more limited, spending on home
improvement significantly exceeds spending on new construction
Also of note is that home improvement is considered a strong
contributor to the financial well-being and quality of life of
families, the Joint Center report suggested.
“[In contrast to] the more than two-thirds of all households who
own a home, relatively few households have significant stock market
holdings,” said William Apgar, senior scholar at the Joint
In fact, families that spend the most money on home improvements
realize the greatest rates of home appreciation, Apgar pointed out.
In many regions of the country, in fact, homeowners recover as
as 80% to 90% of the initial cost of home improvements at the time
of home sale, he noted.
“Home improvement [continues to be] a stable and valuable
investment for homeowners,”
Apgar summarized. KBDN