Beyond the next few years, there are several reasons to be optimistic about the long-term outlook for the remodeling market, with demographics and an aging housing stock pointing to sustained growth.
The Harvard Joint Center for Housing Studies sees several reasons to be positive, says Kermit Baker, director of the Remodeling Futures Program.
A balanced market
During the boom, the market was dominated by large discretionary projects. For the last few years, it’s been heavily influenced by replacement projects. A return to a balanced market is the best thing for the industry, Baker says.
“We really can’t get a full-blown recovery in the market until we see all of the sectors begin to do better,” he says. “That’s what we’ve begun to see over the last few months – more balanced growth across the various remodeling categories.
Rental and multifamily opportunities
As more people – by choice or circumstance – move from owning to renting, that should lead to more pressure to remodel what is a “very under-improved rental stock,” Baker says.
“It hasn’t really materialized yet and the reason it hasn’t is we have an over-supply of for-sale homes that have been converted over to the rental market,” he says. “Once that does get sorted out, we have an old, under-invested rental housing stock, with suddenly more interest on the part of households in renting at least in the near term.”
Although immigration has dropped during the recession, those numbers should pick up again once the economy recovers. Earlier Joint Center research shows that foreign-born homeowners are growing their spending much more quickly than native-born homeowners.
“We do assume the immigration numbers are going to come back,” Baker says. “We’re going to get back on that track … where the immigrant share of new home buyers, existing home buyers, home remodeling spending will keep growing for these households.”