Quantifying the Market

Harvard’s Joint Center for Housing Studies attempts to put some numbers on the remodeling industry

March 09, 2000
Rod Sutton's Editorial Archives

A few weeks ago, we were lamenting the fact that accurate, reliable numbers for the remodeling industry are nonexistent. Trying to estimate how much is spent without accurate government data or without other reporting methods has frustrated those of us who try to quantify the marketplace for years.

It was perhaps unfair to paint all efforts to attain this goal as falling short. In fact, one report has attempted to bring the industry together. It has its weaknesses, but most of those are because the sources it relies on are primarily Federal in nature. Federal tracking of remodeling is poor.

Yet Harvard’s Joint Center for Housing Studies has put together a report through its Remodeling Futures Program that has given those of us in the industry a better look at how home improvement and remodeling happens in this country. The Program’s director, Kermit Baker, has combined data from the U.S. Commerce Department’s C-50 reports and the U.S. Department of Housing and Urban Development’s American Housing Survey to estimate the remodeling marketplace.

Baker has spent years in the construction industry as an economist, including many years tracking the home improvement industry for our parent company, Cahners Business Information. Baker’s understanding of the marketplace from an economics point of view is laudable.

Harvard has since published its report on the industry, titling it "Improving America’s Housing."

The report is broken up into six main sections (links are .pdf files):

 

 

  • Residential Remodeling Market Overview

     

  • Determinants of Homeowner Spending

     

  • The Do-It-Yourself Market

     

  • Professional Remodeling Contractors

     

  • Remodeling of the Rental Stock

     

  • The Outlook for Remodeling

    Harvard tags the residential remodeling market at about $150 billion annually, a figure that represents about 2 percent of the nation’s gross domestic product. The report also says that nearly 800,000 "establishments and self-employed contractors" existed in 1998.

    These numbers represent the best estimate the industry has been able to come up with. In fact, according to Baker, the Joint Center’s report suggests that government estimates may be off by as much as 30 percent. "The contribution of remodeling to our nation’s economy has long been underestimated," Baker says. "Not only is remodeling a sizeable industry in its own right, but it stimulates substantial additional spending for related activities like home furnishings, appliances and lawn & garden products."

    Significant findings include:

     

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  • One in 10 homeowners spend more than $5,000 a year on remodeling, and this group accounts for more than 50 percent of total spending.

     

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  • Within two years of having a child, more than 75 percent of homeowners report a home improvement, and spend 40 percent more than others.

     

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  • Homebuyers spend an average of $2,000 more on remodeling during the first two years after purchase than non-movers; trade-up buyers spend three times more than first-time buyers.

     

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  • The aging of baby boomers will produce more growth in the use of professional contractors for home improvements, as well as in installed sales programs by home centers.

    Rod Sutton is the Editor-in-Chief for Professional Remodler. Please email him with any comments or questions regarding his column.

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