Cambridge, MA, Jan. 28--Even with the ups and downs of the broader economy, growth in spending on residential remodeling and repairs has been remarkably steady. In fact, the home improvement industry
has not seen a major downturn since the early 1990s, according to a recent report by The Joint Center for Housing Studies of Harvard University.
Remodeling expenditures by homeowners and rental property owners totaled $233 billion in 2003, accounting for 40 percent of all residential construction and improvement
spending and more than 2 percent of the US
economy.
The remodeling industry has the baby boomers to thank for putting it on the economic map. Once that generation entered
the housing market, expenditures for remodeling projects tripled between 1970 and 1980, and then jumped another 250
percent between 1980 and 1990.
Most signs point to continued spending growth, the study says. Favorable home mortgage rates, together with the overall aging of the population, have pushed the homeownership rate to over 68 percent from under 64 percent in 1993. Most analysts expect the ownership rate to continue to rise over the coming decade.
Since owner-occupants on average invest more on home improvements than renters, a higher homeownership rate should translate into even stronger remodeling and repair
expenditures.
At the same time, the nation’s inventory of homes numbers some 120 million units, with about 1.5 million homes added each year to this base. At an average age of 32 years and rising, the stock of homes is in constant need of maintenance and upgrading. Fortunately, significant increases in house prices over the past decade have given owners not only an incentive to protect their housing investments, but also the rapidly growing equity to finance those improvements.
After factoring in both homeowner and rental property owner spending, the home improvement market has grown to nearly
one-quarter trillion dollars. Homeowners contribute over 75 percent of all remodeling expenditures, with the vast majority devoted to "do-it-yourself" or "buy-it-yourself" projects and payments to professional contractors for improvements. Maintenance and repair expenditures, in contrast, represent just over 20 percent of homeowner spending.
Spending on rental properties makes up the other 25 percent of total maintenance and improvement dollars. While more volatile than homeowner spending, remodeling expenditures by rental property owners have generally been on the upswing in recent years. This trend may reflect the relative weakness of multifamily construction over the past decade and the increased importance of an aging inventory in meeting
rental housing demand, the Harvard report concludes.
