It’s National Home Remodeling Month—Have You Seen These Posts?

May 30, 2014

May is National Home Remodeling Month, and Eye on Housing recognized the occasion with a series of posts on home remodeling.  As the month draws to a close, we provide a list of those posts for anyone who may have missed them.

Baths Edge Kitchens for Most Common Remodeling Project in 2013   May 1, 2014

Number 1 Reason to Remodel: Simple Desire for New Amenities  May 7, 2014

$100,000 in Remodeling=Nine Tenths of a Full-Time Job   May 12, 2014

Benefits of Hiring a Professional Remodeler   May 13, 2014

Remodelers’ Customers Like Quality, Professional Designations   May 19, 2014

Efficient Windows Top List of Green Products Used by Remodelers   May 22, 2014

Remodeling by Zip Code: NAHB Releases 2014 Projections   May 26, 2014

Also, shortly before the month started, NAHB’s quarterly post on the Remodeling Market Index appeared as usual.

And don’t forget that an up-to-date chart and discussion on the amount being spent to improve owner-occupied housing appears every month as part of NAHB’s post on Construction Spending.

Finally, beyond the blog, NAHB’s main web site contains a number of National Home Remodeling Month Promotional Materials.


Remodeling by Zip Code: NAHB Releases 2014 Projections

May 26, 2014

NAHB just released new estimates of spending on improvements to owner-occupied housing by zip code.  The estimates are based on a model relating improvement spending to five key variables (number of homes in the area, the share built in the ’60s, share built in the ’70s, owners’ average income and level of education), projected to calendar year 2014.  As before, the estimates show total spending on improvements, as well as spending per home, in each zip code.

On average, total spending on improvements in a zip code is projected to be about $5.1 million in 2014.  The top 5 total-spending zip codes are all in Maryland, Texas, or Illinois.  Each of these top 5 zips contains at least 15,000 owner-occupied homes and home owners who average at least $145,000 in income and are 60 percent or more college educated.  Most of these top 5 zips don’t have an unusually large share of homes in the key vintage for remodeling (homes built from 1960 to 1979), except for the zip at the very top of the list—#20854 in Maryland, a close-in suburb of Washington DC.  20854 is the only zip where over $60 million in spending on improvements is projected for 2014, and over half the owner-occupied homes in that zip were built 1960-1979.

The map below illustrates improvement spending per owner-occupied home.Remodel_zecta14

In the average zip code, improvement spending per home is just under $1,600.  The top two zip codes by this measure are the same as they were in 2013: #94528 (in a suburb of San Francisco) and #10007 (in Manhattan).  These are the only two zips with projected spending per home of over $5,000 (even over $6,000 in 94528), although several others come fairly close.  This year, unlike last, a zip code in New Jersey cracked the top five—#07078, a suburb within commuting distance of New York City. Homeowners in the top 5 improvement-per-home zips are at least 92 percent college educated and have average incomes of at least $350,000. Nearly half the owner-occupied homes in top zip #94528 were built 1960-1979.

The improvement spending projections for 2014 are based on a statistical model developed by NAHB economists using data from the HUD/Census Bureau American Housing Survey and summary statistics for the Census Bureau’s approximation of zip-code areas from the American Community Survey. Members of NAHB Remodelers can log onto NAHB’s web site with their usernames and passwords and access improvement spending projections in more than 25,000 zip codes here. Projections aggregated to the state level are available to everyone, and are reproduced below:

State Remodeling 2014


Efficient Windows Top List of Green Products Used by Remodelers

May 22, 2014

Energy efficient windows emerged as the leading green product among remodelers responding to NAHB’s Remodeling Market Index (RMI) survey for the first quarter of 2014, as nearly 9 out of 10 remodelers surveyed said they’d commonly used low-e windows during the past year.  Next on the list were high efficiency HVAC systems and programmable thermostats at 70 percent each, closely followed by ENERGY STAR appliances at 69 percent.

Green Remod

Although the features at the top of the list all involve energy eficiency, the term “green” is usually defined more broadly than that.  Moisture control, for example, is classified as green here, because it results in some components of the home needing to be replaced less often, reducing environmental impacts associated with manufacturing, transporting and installing those components over time. The list of 23 green products and practices used in the RMI survey is based on the major sections of the National Green Building Standard (which can and should be applied to remodeling as well as new construction).

Given the difference in cost, it’s perhaps surprising that use of program-mable thermostats is no more common than use of high efficiency HVAC among remodelers.  Anecdotally, several NAHB members have reported that a small but discernible share of their customers tend to resist devices that require programming.  A similar result was found in a survey on green products and practices used by single-family builders.

It’s also interesting that, across the two surveys, the same four green features appear at the top of the list and in the same order for both remodelers and builders.  The remodelers’ percentages tend to be a little lower, but this is natural, because not every remodeling project involves every home component. High efficiency HVAC systems, for example (the second ranked green feature for both builders and remodelers) are commonly used by 90 percent of builders, compared to 70 percent of remodelers.  But remodelers who specialized in projects like replacing windows or building decks in 2013 may have seldom if ever needed to install HVAC systems, while builders of new homes would have, at some point, dealt with every aspect of HVAC.


Remodelers’ Customers Like Quality, Professional Designations

May 19, 2014

A previous post discussed hiring a professional remodeler, with an emphasis on those remodeling projects (like roofing or HVAC work) that most often involve homeowners hiring a contractor as opposed to attempting it themselves. This one deals with the choice of a particular contractor.

The evidence comes from a question on NAHB’s most recent Consumer Preference Survey that asked potenital customers what they look for when choosing a contractor for their home construction projects. (The question didn’t distinguish between remodeling and new construction contractors, on the theory that the desirable qualities would be similar for both.)

In particular, the question asked customers to rank the importance of five contractor attributes on a scale from 1 through 5 (1 being most important; 5 least). “Reputation for quality construction” easily came in first, ranked most important by 45 percent of customers—over twice the “most important” percentage for any other attribute on the list.

Contractor Attributes

This naturally leads to a question about what a remodeler can do to achieve a reputation for quality. One possibility is to acquire one or more specialized, professional designations (credentials awarded by trade associations or government organization certifying expertise in a particular area.)   NAHB has several such designations for remodelers, including Certified Graduate Remodeler, Certified Aging-In-Place Specialist, Certified Green Professional, Master Certified Green Professional and Graduate Master Remodeler.

The consumer preference survey also contained a question on what potential customers think about contractractors with professional designations.  The NAHB economists who tabulated the survey were somewhat surprised at the strength of the positive response.  Well over 70 percent agreed with four positive statements about contractors with designations, headed by 83 percent agreeing that contractors with designations are “more professional and credible.”

Contractor Designations

But the best evidence that remodelers can benefit from professional designations probably comes from the strong positive statement on the bottom of the chart.  Although the percentage is slightly lower than for other statements on the list, 64 percent of customers still agree that contractors with professional designations are “worth paying a higher price for.”

 


Benefits of Hiring a Professional Remodeler

May 13, 2014

It is National Home Remodeling month and NAHB wants to emphasize the benefits of hiring a professional remodeler.  There are two aspects to this: 1) hiring a contractor rather than attempting a project yourself, 2) hiring a contractor who is a well-qualified professional remodeler, such as members of NAHB Remodelers or those who have earned one of NAHB’s Professional Designations.

According to  2011 American Housing Survey (AHS) tables from HUD and the Census Bureau, over 60 percent of home owners hire contractors for home improvement activities overall, but the share varies depending on the activity.  At the top of the list among activities undertaken by at least 1 million homeowners a year, 87 percent of owners hire contractors for HVAC jobs, followed by roofing jobs at 82 percent.  On a dollar basis, the shares would be significantly higher, as owners tend to hire contractors for larger projects (see previous post).

Professional Blog

A leading reason NAHB recommends home owners be careful about attempting projects on their own are safety, as lack of familiarity with tools and techniques can lead to serious accidents.  Working on a roof is often cited as an activity with the potential for serious injury.  Another reason is cost, as home owners may forget to factor in the cost of tools.  Many remodeling projects require specialized tools, which a home owner will purchase and only use once or twice.   Cost of a project, of course, can also escalate if it is done incorrectly the first time and therefore has to be re-done.

An advantage of a well qualified professional remodeler is experience with the appropriate tools and specialized knowledge needed to perform correctly.  HVAC work is an example of something that can’t be done by everyone and requires specialized knowledge, for example to size a unit correctly for a particular home.  A follow-up post next week will cover what homeowners look for in a remodeler and what they think of remodelers with professional designations.


$100,000 in Remodeling=Nine Tenths of a Full-Time Job

May 12, 2014

In addition to benefitting those who live in remodeled homes, remodeling also has the ability to stimulate the U.S. economy. The latest estimates released by NAHB show that spending $100,000 on remodeling generates about $48,000 in wages and salaries in the U.S., which translates to .89 of a job measured in full-time equivalents (enough work to keep one worker employed for a year).

Much like the impacts of new construction, a substantial share of the wages and salaries goes to construction laborers—those who actually install cabinets, replace windows, renovate bathrooms, etc. But the effects are broader. Every $100,000 in remodeling also supports one tenth of a full-time job in firms that manufacture building products, slightly more than that in firms that transport or store or sell those products, and about half that in businesses that supply design, accounting and other professional services to remodelers and their customers.Remod Jobs In addition to wages and jobs, it can also be worthwhile to look at profits generated for business proprietors. Many remodelers and especially their subcontractors are relatively small businesses and self-employed, so in the technical sense they don’t have jobs or earn wages, although that’s the way casual observers no doubt think of them. In the construction industry, the roughly $13,000 in profit that $100,000 in remodeling generates for mostly small businesses proprietors is more than 40 percent as large as the $30,000 generated in wages and salaries.

The wages and profits earned in the course of remodeling are subject to a variety of taxes and fees. The national impacts of $100,000 spent on remodeling also include $21,844 in federal taxes and $7,935 in fees and taxes imposed by state and local governments, for a total of $29,799 in revenue for governments at all levels.Remod TaxesThe government revenue includes a permit fee equal to 1.25% the cost of the remodeling project, the percentage based on conversations between NAHB’s Economics and Housing Policy staff and NAHB Remodelers. For other assumptions and more details about the methodology used to derive NAHB’s national impact of remodeling estimates, please consult the full report, published online as a Special Study in HousingEconomics.com.


Number 1 Reason to Remodel: Simple Desire for New Amenities

May 7, 2014

According to remodelers who answered special questions on NAHB’s Remodeling Market Index (RMI) survey for the 1st quarter of 2014, a simple “desire for better/newer amenities” ranked as the number one reason customers choose to remodel their homes. On a scale of 1 to 5 (where 1 indicates never or almost never, and 5 is very often), the average remodeler’s response was 4.3.

“Desire for better/newer amenities” edged out the second place “need to repair/replace old components” by one tenth of a point. These traditional market drivers were the only reasons to remodel with an average rating above 4.0. Another fairly traditional reason, “desire/need for more space” came in third at 3.7.

Reasons to remodel that are of special interest to particular stakeholders—like aging in place and energy efficiency—were further down the list, with average responses near the 3.0 center of the scale. Relatively low average ratings for increasing the home’s investment value or preparing it for a sale continue to support the idea that owners are more likely to remodel for themselves than for future owners. Getting a property ready for a distressed sale scored a particularly low 1.3 (very near the minimum possible 1.0).Remodeling Reasons 2013At the margin, of course, less common reasons to remodel can still fuel an increase in activity if they are on the rise. However, this is only the second time we’ve asked the “reasons to remodel” question on the RMI survey (the first being in the first quarter of 2012), and most of the answers on average changed very little in the intervening two years. Indeed, the average rating for 9 of the 12 categories changed by one tenth of a point or less.

One exception was an increase from 2.8 to 3.0 in the “desire to be able to age in place,” something many observers were probably expecting given the aging population. “Desire/need for more space” also increased two tenths of a point. “Desire for better/newer amenities” posted the largest gain, going from 4.0 to 4.3. A rise in remodeling projects motivated by desire for more space or better amenities is consistent with the general housing market recovery that many experts expect to continue.

This is the second item we’ve posted in May in recognition of National Home Remodeling Month. The first was on the most common types of remodeling projects.


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