Sunnyvale, CA —The bad news continues for the US home remodeling industry; 4th quarter 2008 www.remodelormove.com Remodeling ReportPermit Activity Report
a quarterly summary of remodeling permit activity in the US, shows a drop of 38% in the number of permits issued compared to the 4th quarter 2007.
This drop ended a year of decline for the industry with the number and value of remodeling permits falling 20% in 2008 compared to 2007. And the decline is expected to continue in the short term as reported by the www.remodelormove.com Remodeling Sentiment Report – a survey that asks about homeowners remodeling plans in the next 12 months- shows a decline of 24% in homeowners who say they will remodel as compared to the 2007 results. Past reports are available at http://www.remodelormove.com/survey_reports.cfm
Why Have Homeowners Stopped Remodeling?
Many homeowners are choosing to delay their remodeling projects until better economic times. The same wealth effect that between 2005 to 2007 drove the remodeling industry ever higher is now slowing the industry. Record home prices gave homeowners a feeling of wealth that enabled them to spend more freely. Even if a homeowner did not use a home loan or otherwise leverage their growing home equity – the feeling of wealth from a high amount of home equity gave them more confidence to spend their savings on a home remodel to expand or update their homes.
With average US home prices down 21% since 2006 according to the National Association of Realtors,® homeowners’ real and perceived wealth has disappeared leaving little interest in spending money on home improvements. But for those who choose to remodel – times have never been better. Low interest rates, retailers offering discounts, stimulus package tax credits and contractors who are offering lower prices to win contracts to keep their business can add up to big savings.
As an example – for a kitchen remodel costing $70,000 in 2006 – the same remodel could cost as little as $50,000 today with savings on the materials price- always a large cost in a kitchen remodel, –tax credits on windows, water heaters and appliances from the stimulus package and rebates from utility companies, and lower prices from contractors for labor and mark up as they compete aggressively to win business.
Failure of homeowners to capitalize on this unique set of market drivers could indicate confusion about the effects of the current economic climate and ignorance of the tax credits for energy efficient home remodeling extended in the 2009 stimulus package. When economic distress is driving down the cost of labor and retailers are drastically reducing the prices on construction materials, appliances and other items, There has not been a better time to remodel for many years. Considering that homeowners who do energy efficiency upgrades as part of a remodel will also enjoy much lower utility bills for the foreseeable future, it almost seems a financial blooper to not be remodeling now.
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