Study reveals new reasons to tackle home improvements
Darryl is just plain tired of keeping his wallet clamped shut.
OK, so the 69-year-old Las Vegan lost his job in a local men's clothing store nearly two years ago, and few fresh career opportunities loom on the horizon. But if there's one thing worse than waking up unemployed, it's waking up unemployed and taking your morning coffee in an outdated kitchen.
And that's why Darryl, who declined to give his last name, found himself inside the Home Depot on West Charleston Boulevard on Tuesday afternoon, buying a $60 lighting fixture to cap off the six-month, $60,000 renovation of his Peccole Ranch home.
"Yeah, I am concerned about all the spending, but I just wanted to try not to be as depressed," said Darryl, whose wife works as a manicurist. "I thought it was something that would make me feel better."
Now, a new national study shows legions of Americans set to launch similar spending binges this spring, positioning the home-improvement industry for a 2011 revival as property owners who scrimped and saved during the recession spruce up kitchens and bathrooms.
Spending on remodeling probably will rise 9.2 percent to $125.1 billion in the first quarter from $114.6 billion a year earlier, according to Harvard's Joint Center for Housing Studies.
A 13 percent increase forecast for April through June would be the largest jump in five years, a report by the Cambridge, Mass.-based center shows.
Home-improvement retailers are preparing for a spring sales bump as homeowners consider upgrading rather than selling their houses at a discount in a struggling market.
Signs of recovery in the economy are encouraging people to spend money on work they might have been putting off for years, said Paul Zuch, president of the National Association of the Remodeling Industry, a trade group based in Des Plaines, Ill.
"There's an overwhelming pent-up demand for remodeling," Zuch said. Capital Improvements, his Allen, Texas-based company, lined up about $800,000 in projects for the first two months of the year, more than its total sales for 2010, he said.
Bonnie Stillman, an interior designer in Las Vegas, said she's seen business pick up since January, especially among clients looking for smaller, more affordable renovations such as fresh paint jobs. She credited the remodeling boost to recession fatigue -- the notion that consumers have wearied of the thrift they adopted to survive the nation's two-year economic downturn.
"I think people are just getting sick of not doing anything," Stillman said as she looked over paint samples inside the Home Depot. "And I think they're nesting. They're not going out as much or doing as much outside the home, so they're trying to fix up what they can and enjoy their homes more."
Former clothier Darryl echoed those sentiments.
"We couldn't afford to go anywhere, so we wanted to freshen up the home," he said. "And it was our 30-year anniversary present to ourselves."
Among Darryl's improvements were modern kitchen appliances, upgraded marble counter tops, fresh cabinets and new paint. He and his wife also swapped out electric fixtures with recessed can lights and replaced the carpet going up the stairs and onto the second story with wood floors.
Remodeling isn't just for the recession-weary, though.
Enbo Yang and his wife, Linda Wang, perused the Home Depot's selection of window treatments on Tuesday, looking for blinds to replace missing shades inside the bank-owned Summerlin home they purchased in December. The couple have stayed in an apartment while they finished renovating the house, spending roughly $10,000 on upgrading the master bedroom and bathroom with new floors and a Jacuzzi tub. Up next: yardwork, including a fish pond and some artificial turf.
Yang, a piano teacher and first-time homeowner, said he didn't blanche at the rehab investment.
"First of all, I think the price of the property is kind of at the lowest point, and second, I know I'm going to live there quite a long time. I want to make sure everything's OK before I move in," he said.
Experts said consumers could continue to drop major dollars on remodeling for the foreseeable future. Spending on renovations may increase 3.5 percent annually through 2015, according to the Harvard center, which measures data including hours worked by remodelers and retail sales at building materials stores.
The gain follows a decline that started in the third quarter of 2007 and sent spending to a six- year low of $112 billion in 2009.
New owners of discounted, foreclosed properties and a tax credit for energy-efficient windows and modifications will help drive remodeling demand, the Harvard center said. The bulk of spending during the next five years will be on replacements and upgrades rather than high-end projects, according to the report.
Some property owners are stuck in their homes after falling values left almost a quarter of mortgage holders owing more than their residences are worth, according to CoreLogic Inc. Home prices fell 2.4 percent in December from a year earlier and are down 31 percent from the July 2006 peak, based on the S&P/Case-Shiller index of values in 20 cities.
"Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties," said Mark Fleming, chief economist at Santa Ana, Calif.-based Corelogic. "Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish."
The negative equity may limit remodeling projects as it dries up a source of funding.
Americans spent about $63 billion a year from home-equity loans on renovations during the 2000 to 2005 real estate boom, according to a 2007 paper by former Federal Reserve Chairman Alan Greenspan and Fed economist James Kennedy.
"Consumer behavior is saying 'I'm going to invest in my home again,' even if they're not seeing gains in equity," said Joe Emison, vice president of research and development at BuildFax.
That's certainly the case with Darryl, who said his 401(k) disappeared along with his retail job.
"Maybe I spent foolishly, but I do feel a little better when I get up in the morning," he said. "If I waited until I was 90 to do it, then I wouldn't be able to see it."