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US home improvement industry poised for growth
In the wake of the worst downturn in recent history, the US home improvement industry is poised for growth, according to a major report released yesterday by the Joint Center for Housing Studies at Harvard University.
'A New Decade of Growth for Remodeling', is the sixth and latest report in the 'Improving America's Housing' series, published by the Remodeling Futures Program at the Joint Center.
"As both the economy and the housing market stabilise, so too will homeowner improvement spending," says Abbe Will, a researcher with the Remodeling Futures Program. Over the coming years, remodeling expenditures are expected to increase at an inflation-adjusted 3.5% average annual rate, below the pace during the housing boom, but sharply recovering from the recent downturn.
The industry, which saw a double-digit decline since its peak in 2007, is beginning to return to a more typical pattern of growth. Market fundamentals-the number of homes in the housing stock, the age of those homes and the income gains of homeowners making improvements, all point to increases in home improvement spending.
Eric Belsky, managing director of the Joint Center, predicts that metropolitan areas with rising house prices, older housing stocks, higher incomes and home values and a larger share of upscale remodeling expenditures (such as Boston, San Francisco and Los Angeles) are well-positioned for an upturn in home improvement activity.
"In the next five years, the focus of home improvement spending will shift from upper-end discretionary projects to replacements and systems upgrades," he says. "Contractors will have a number of growth opportunities generated by under-investment in distressed properties, lower mobility, changing migration patterns and the rise of environmental awareness."
Kermit Baker, director of the Remodeling Futures Program at the Joint Center, believes that lower household mobility following the housing market crash means that in the coming years homeowners will increasingly focus on improvements with longer paybacks, particularly energy-efficient retrofits. "Also, a slowing of migration to traditionally fast-growing Sunbelt metro areas means that, at least temporarily, more remodeling spending will remain in older, slower-growing areas in the Rustbelt and in California," he says.
The Joint Center for Housing Studies is Harvard University's centre for information and research on housing in the US and beyond, and the Remodeling Futures Program is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity.
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14th January 2011