New York, NY, May 15--Most American homeowners consider their homes to be their most significant investment, so it's no surprise that some 26 million of them undertake an improvement project every year. According to the new Johnnie Walker Red Label Home Improvement Index, which tracks the inflation rate in this booming industry, those planning a project in 2003 face rising costs and higher demand for contractor services.
The Index, including the responses of more than 160 contractors from across the U.S. who specialize in home improvement, shows the cost of 10 popular projects increased by a whopping 10.2% from 2002 to 2003. That's three times the government's inflation rate of 3.4% for the year.
When asked to cite the major reasons for the rise in prices, 50% of the contractors cited increased labor costs, 35% blamed increases in the costs of materials, 24% mentioned higher health and liability insurance rates, and five percent apiece attributed it to the costs of fuel and specialized sub-contractors.
Despite the double-digit inflation rate, 59% of the home improvement contractors are forecasting an increase in business for the coming year, as interest rates remain low and the desire to create bigger and better home environments continues.
"Home investment and enjoyment continues to grow in importance in the U.S., especially during a time when people are traveling less and the stock market returns are trailing historical averages. "Even when times are tough, people want to have a taste of the good life. Improving your surroundings is a very tangible way of achieving this," says Kevin Martin of Johnnie Walker. "Our consumers tell us that they not only recognize the economic benefits, but they really enjoy working on their homes. Whether they involve outside contractors or do it themselves, it's a wonderful form of self-expression. It's also something that they can easily share with friends and family, which is why we wanted to learn more about it."
Martin points out that the home improvement trend encompasses projects that offer a high return on the dollar when a home is sold - bathrooms and kitchens, for example, where the homeowner can expect to recoup 80-90% of the investment. It also includes projects such as fireplaces, home bars, decks and pools, where the end result is often a great space for home entertaining and relaxation.
Whatever the project, the emphasis on home renovation is expected to continue: the Harvard University Joint Center for Housing Studies anticipates a 4% increase in spending, now at a record $214 billion, in 2003. The contractors in the Johnnie Walker Index agree: 69% believe it's a long-term trend that won't weaken anytime soon.
