Momentum Building for Remodeling
Spending by homeowners on improvement projects is expected to accelerate in 2013, according to the Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. On top of the almost 10 percent growth reflected in U.S. Census Bureau figures for 2012, the LIRA projects strong gains in homeowner remodeling spending continuing throughout 2013, with some moderation in the pace of growth toward the end of the year.
“Existing home sales were up almost 9 percent last year, and house prices are increasing in most markets across the country,” says Eric S. Belsky, managing director of the Joint Center. “This has increased the home equity levels for most homeowners, encouraging them to reinvest in their homes.”
“The strong growth that we’ve seen recently is putting pressure on the current capacity of the home improvement industry,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “Contractors and subcontractors are having more difficulty finding skilled labor, and building materials costs are unusually volatile for this stage of a recovery.”
Multifamily Building Pushes Starts Past 1 Million
Soaring production of multifamily apartments pushed nationwide housing starts beyond the million-unit mark for the first time since 2008 in March, according to HUD and the U.S. Census Bureau. Total starts activity rose 7 percent for the month due entirely to a 31.1 percent increase on the multifamily side, while single-family production slipped 4.8 percent from a number that was revised strongly upward for the previous month.
“The three-month moving average for single-family starts remained unchanged at 628,000 units in March — which is right on pace with NAHB’s forecast for a 25 percent gain in new-home production in 2013,” says NAHB Chief Economist David Crowe.
Pending Sales Limited by Inventory
February pending home sales remained at the second highest level in nearly three years even though a limited inventory in some areas held back the market in some areas, according to the National Association of Realtors. The Pending Home Sales Index, a forward-looking, slipped 0.4 percent to 104.8 in February from a downwardly revised 105.2 in January, but is 8.4 percent higher than February 2012 when it was 96.6. Contract activity has been above year-ago levels for the past 22 months. Before January, the last time the index showed a higher reading was in April 2010 when it was 110.9, shortly before the deadline for the home buyer tax credit.
Low Rates Drive Affordability
Thanks to historically low interest rates, American homeowners paid almost 37 percent less per month in mortgage payments in the fourth quarter compared to pre-housing-bubble norms — even as homes themselves cost 14.5 percent more in the fourth quarter compared to historic averages relative to U.S. median incomes, according to Zillow. Low interest rates have given American homeowners a significant boost to their purchasing power.
Home Prices Accelerate
Average home prices increased 7.3 percent for the 10-City Composite and 8.1 percent for the 20-City Composite in the 12 months ending in January 2013, according to the S&P/Case-Shiller Home Price Indices. All 20 cities posted year-over-year gains with Phoenix leading with a gain of 23.2 percent. Nineteen of the twenty cities showed acceleration in their year-over-year returns. Despite posting a positive double-digit annual return, Detroit was the only city to show a deceleration. After 28 months of negative annual returns, New York came into positive territory in January.
Second-home Sales Up
Vacation home sales improved in 2012, while investment purchases remained elevated for a second consecutive year, according to the National Association of Realtors. Vacation-home sales rose 10.1 percent to 553,000 from 502,000 in 2011. Investment-home sales declined 2.1 percent to 1.21 million from 1.23 million in 2011, but those sales had been well under a million during the market downturn. Vacation-home sales accounted for 11 percent of all transactions last year, unchanged from 2011, while the portion of investment sales was 24 percent in 2012, down from 27 percent in 2011, marking the second highest share since 2005.
Existing-Home Sales Rise
Sales of existing homes have been above year-ago levels for 20 consecutive months, while prices show 12 consecutive months of year-over-year price increases, affirming a healthy recovery is underway in the housing sector, according to the National Association of Realtors. Total existing-home sales increased 0.8 percent to a seasonally adjusted annual rate of 4.98 million in February from an upwardly revised 4.94 million in January and are 10.2 percent above the 4.52 million-unit level seen in February 2012. February sales were at the highest level since the tax credit period of November 2009.
Labor Shortages Impeding Housing Revival
Growing labor shortages in all facets of the residential construction sector are impeding the housing and economic recovery, according to the National Association of Home Builders. “Residential construction firms are reporting an increasing number of shortages in all aspects of the industry – from carpenters, excavators, framers, roofers and plumbers, to bricklayers, HVAC, building maintenance managers and weatherization workers,” said NAHB Chief Economist David Crowe. More than half of the builders surveyed reported that labor shortages over the past six months have caused them to pay higher wages or subcontractor bids to secure projects, and consequently, to raise home prices. Moreover, 46 percent of the builders surveyed experienced delays in completing projects on time, 15 percent had to turn down some projects and 9 percent lost or cancelled sales as a result of recent labor shortages.
Consumer Use of Kitchen-related Websites for Kitchen Remodeling Projects
Yes – 53%
No – 47%
[as a footnote/sidebar to chart]
More likely to Have Used Web for Design and Product Information
— Have kids in the home
— Tech-savvy consumers
Source: The Smart Kitchen: How Consumers Use Digital Media & Other Technologies in their Kitchens, Research Institute for Cooking & Kitchen Intelligence (RICKI)