Do It Yourself or Hire a Professional?

May 8, 2013

To celebrate National Home Remodeling Month in May, the National Association of Home Builders (NAHB) Remodelers recommends that home owners consider the safety risks, time delays and hidden costs before attempting do-it-yourself (DIY) home improvements.

According to the 2011 American Housing Survey (AHS) from the HUD/Census Bureau, home owner do-it-yourself (DIY) projects accounted for 37 percent of all home remodeling projects performed nationwide from 2010-2011 but only 18 percent of all remodeling spending. DIY home improvement projects tend to be smaller, require less technical training and expertise and cost less, with 50 percent of home owners spending less than $950 on these projects. At the same time the median spending on professional remodeling projects is close to $4,000.

One of the most expensive remodeling projects is a kitchen addition, with half of these projects costing more than $27,000. Very few homeowners attempt or manage to add a kitchen on their own. The AHS data show that more than 80 percent of kitchen additions are done professionally.  Replacing roofing is also largely outsourced to professional remodelers, 82 percent of these projects are completed by professionals. Home owners also tend to hire professionals when it comes to home improvement projects that require technical training and, often, a professional license.  Close to 90 percent of all remodeling projects that involve adding or replacing HVAC system are done professionally. Almost two thirds of projects that replace internal water pipes, electrical system, major equipment and appliances are completed by professionals. Not only that home owners might not have the right tools and knowledge to complete these projects, but many warranties become void by improper installation.

Home owners are more adventurous and successful in finishing smaller projects. About half of all plumbing fixtures replacements are completed with no professional help. More than half of all bedroom and recreation room renovations are completed by home owners as well. These tend to be smaller projects, with half of them costing less than $1,500 and $1,600, respectively. Professional bedroom and recreation room renovations are bigger in scope with median spending of $5,000 and close to $7,000, respectively.

For additional tips and considerations before taking on a DIY home remodel read the National Association of Home Builders (NAHB) Remodelers press release


HUD Study Finds 23.8 Million Homes Have Served Both Owners and Renters

June 22, 2012

A recent study commissioned by HUD used the American Housing Survey (AHS, funded by HUD & conducted in odd-numbered years by the Census Bureau) to look at how the stock of housing in the U.S. has evolved to serve different segments of the market over time.  The study found that 23.8 million of the homes present in 2009 had switched back and forth between serving owners (being either owner occupied or vacant for sale) and renters (renter occupied or vacant for rent) at some point since 1985.  This is considerably fewer than the 54.2 million units that had been for owners consistently, but more than the 18.3 that served the rental community continuously during that span:

The remainder of the 129.7 million housing units not shown in the above graph were either seasonal or had some other kind of mixed history (renter/seasonal, owner/temporarily out of the stock, etc.)

The HUD study also used statistical models to show how various attributes of a home affect its chances of having a mixed owner/rental history.  The chart below shows how fewer bedrooms, an earlier vintage, and a location in the West Census Division alter the chances for a  base case 2-bedroom single-family detached home, built in the late 1970s in a Southern central city:

To conduct the study, HUD commissioned Econometrica, Inc. of Bethesda Maryland to employ a special data file that traces what happened to individual housing units across all 13 installments of the AHS conducted between 1985 and 2009.  The most common career path for the mixed own/rent cases was a housing unit that served renters in 1 survey and owners in 12, followed by a unit that served renters in 2 surveys and owners in 11.

The fragile and temporary attachment of some units to the rental stock has significant implications for U.S. housing markets.  An apparent surplus of rental units on the market may disappear quickly if the rate of renter-to-owner conversions accelerates with changing economic conditions.

The study also illustrates the importance of continuing to fund and conduct the AHS, as there is no other national data set that can trace how individual housing units evolve to serve different segments of the market over time.


NAHB Finds Problems of Existing Housing Stock Often Understated

May 7, 2012

The traditional method for measuring the quality of homes, developed by the Department of Housing and Urban Development (HUD), shows only about 1.5 percent as severely inadequate.  Using the same data source (the HUD/Census Bureau American Housing Survey), NAHB defined inadequate housing in a way that not only helps explain why prices and rents are sometimes lower than expected, but also shows that over 10 million homes in the U.S. are truly inadequate, about double the number usually reported as having even moderate physical problems.


The NAHB method for identifying physically inadequate housing is based on statistical models that estimate prices and rents.  In contrast to the traditional definitions, inadequacy as defined by NAHB has a demonstrable, negative effect on housing values and rents. The characteristics NAHB finds that depress values and rents are relatively simple and generally agree with intuitive ideas about what would constitute a physically inadequate home.  For a single-family home, the NAHB criterion for inadequacy includes missing siding, broken windows, crumbling foundation, or holes in the floor.

Additional findings reported by NAHB show that few owners and renters of inadequate units also have problems with housing affordability (paying 30 percent or more of income for housing), so they represent a net increase in the count of Americans with housing problems. This suggests that some Americans—particularly renters—are trading adequacy for affordability, and implies that the need for programs to support the construction of new housing, or renovate older units, is greater than many policymakers realize.

Also, a large share—over 19 percent—of vacant single-family homes are physically inadequate, and so are not ready for full-time occupancy without substantial renovation and repair.  Stakeholders who fail to take physically inadequate vacant units into account may overestimate the effective inventory of existing homes on the market

A more complete summary of the results is available as an NAHB HousingEconomics.com Special Study.  A more technical version of NAHB’s work on “Housing Value, Costs, and Measures of Physical Adequacy” is published in the March 2012 edition of in HUD’s research journal Cityscape.


Who Lives in New Housing?

April 12, 2012

April is New Homes Month, so we thought we would take a look at the demographic data from the most recent edition of the American Housing Survey (AHS) to see who lives in newly constructed homes. The AHS defines new construction as housing units no more than four years of age.

Typically, larger households are relatively more likely to live in new homes. This is a finding that complements previous NAHB analysis that examined home size and geography.

The graph above reports the percentages of various types of housing (owner-occupied, renter-occupied and newly constructed, both owner and rental) with respect to the number of people who reside in each. For example, the first blue bar shows that about 22% of owner-occupied homes contain one person, while thse second blue bar notes that 36% of owner-occupied homes contain two people.

It is clear that renters are most likely to be one person households. Similarly, two-person households are the most common type for homeowners. The two-person household is also the most common form for new construction, with 33% of newly constructed homes holding two-person households. 

On a relative basis, a greater share of new construction houses three persons or more compared to homes of  homeowners or renters. This can be seen by noting that the green bars in the chart above are higher than the blue and red bars for households with 3 or more people. In fact, 47% of all new construction houses three or more people.

Why?

The short answer is that new construction is more likely to house children than other types of housing on a unit-by-unit basis. As can be seen on the graph above, new construction has the largest shares of homes for all counts of children.  Specifically, 44% of newly constructed units house children. Only 35% of rental units and 34% of owner-occupied units house children.

And this in turn helps explain the age distribution of people who live in new homes. The AHS data indicate large relative shares for new housing with respect to households headed by people aged 30 to 44. And it is worth noting, this is the age segment for whom, as a share of household income, the mortgage interest deduction offers the largest benefits. It is also prime parenting years. Renting households tend to be younger and owner-occupiers as a class tend to be older.

Overall, 78% of heads of households who live in new construction are aged 54 or younger, compared to 56% for all owner-occupied housing. However, these statistics may change in the coming years as more 50+ new housing construction gains strength.


Neighborhoods with New Homes are Preferred

April 9, 2012

April is new homes month. And while the benefits of new homes are typically thought of in terms of the house itself, neighborhoods of new homes are typically preferred by homeowners.

Data from the 2009 American Housing Survey (AHS) offer proof. The AHS classifies new construction as homes no more than four years old.

When asked to rank their neighborhood on a scale of 1 to 10, homeowners generally had a favorable view of their homes’ surroundings.  But owners of newly constructed homes ranked their neighborhoods higher than the scores given by all homeowners.

More than 90% of owners of newly constructed homes ranked their neighborhoods as either a 9 or a 10. Only 65% of all homeowners gave the same scores.

And these rankings of neighborhoods are on top of homeowners rankings of their own homes. 68% of owners of new construction ranked their own home as a 9 or a 10. For all homeowners, the comparable score was significantly lower: 51%.

So in terms of quality of homes and neighborhood, new construction offers significant advantages.


New Homes are Less Expensive to Maintain

April 4, 2012

April is new homes month. And one of the virtues of a newly constructed home is the savings that come from reduced energy and maintenance expenses.

Data from the 2009 American Housing Survey (AHS) offer proof. The AHS classifies new construction as homes no more than four years old.

For example, for routine maintenance expenses, 26% of all homeowners spent $100 or more a month on various upkeep costs. However, only 11%  of owners of newly constructed homes spent this amount. In fact, 73% of new homeowners spent less than $25 a month on routine maintenance costs.

Similar findings are available for energy expenses. On a median per square foot basis, homeowners spent 78 cents per square foot per year on electricity. Owners of new homes spent 65 cents per square foot per year.

For homes with piped gas, homeowners spent on average 53 cents per square foot per year. Owners of new homes spent 38 cents per square foot per year.

These data highlight that a new home offers savings over the life of ownership due to reduced operating costs. This is one of the many reasons that the current system of appraisals needs updating to reflect the flow of benefits that come from features in a new home.