Feb 15 2008 7:30AM | Permalink | Email this | Comments (0) |
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That seems to be the message coming through here in Orlando. Remodeling's down, but we're better off than new construction.

Kermit Baker of the Harvard University Joint Center for Housing Studies and Gopal Ahluwalia of NAHB spoke this morning on the current state and the future of the remodeling market. All things considered, the market's in pretty good shape.

We saw a slight downturn in 2007, with another one expected in 2008, with a recovery coming in 2009. Harvard estimates the market was $278 billion last year, down from $280 billion in 2005, but still great historically. It was only a few years ago we were celebrating the market hitting $180 billion.

There are a few factors driving the downturn last year and this year, Baker said this morning:

• The decline in home sales. Time of purchase is a key remodeling period for most homeowners.
• Declining home prices, which affects homeowner confidence, as well as making it more difficult to attain financing.
• Payback for improvements are lower. Homeowners simply aren't seeing the financial benefits of remodeling that they did just a few years ago. 

This all probably means a swing back to smaller projects, Ahluwalia and Baker said, with the most pain being felt at the high end of the market. Homeowners are worried that they are going to overimprove their home. This makes sense, considering what I've been hearing from a lot of remodelers here. Even some of the best companies, run by veterans of the industry, are struggling to find the big jobs they've been used to over the last few years.

On the whole, though, the future looks great. The market may drop slightly this year, but we're still near historic highs. And NAHB is predicting the remodeling market will reach $369 billion by 2016 -- that's twice the size it was earlier this decade.