House Prices Are a Cause for Concern
The release today of the Case-Schiller house price index for December 2007, has further exposed the soft underbelly of the American Economy and to a lesser degree, the market for professional remodeling services.
The link between home equity – now standing at around $10 trillion across the130 million homes in the U.S. — and remodeling is well established. It is estimated that 30 percent of all cash-out refinancing is used for home improvement. So it goes without saying that house prices fall there is less available for improving homes.
A second effect of lower house prices is a reduced asset value to protect. A house appreciating at 10 percent per year might stand to get a better quality roofing, window or siding product versus a home that has leveled off in value.
At the recent Winter Board of Director meetings of the NAHBR, I asked respected economist Gopal Ahluwalia where he thought house prices might end up in 2008. I cited a Federal Reserve study that showed an imbalance between house prices and rents of 20 percent.
Ahluwalia’s response pretty much summed up the guesswork involved in this: “If I could tell you how much house prices were going to fall in 2008, I would certainly be working somewhere else.”
I don’t know about other businesses, but Basement Systems and Total Basement Finishing are seeing more growth than ever in recent years. Our recently acquired basement remodeling company has been spreading across the country very well and we’re slotted to branch off into foundation repair in about 6 months. I think if a finishing business is still willing to take some measured risks, there’s a ton of opportunity out there!
~Jacques
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