Household Makeovers

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Home Depot may have lost its status as a stock market darling, but America's penchant for home improvement still prevails. Americans are adding, expanding, reconfiguring, and remodeling their homes more than ever, according to a report issued by Harvard University's Joint Center for Housing Studies. Each year, about 26 million homeowners make some kind of improvement to their homes, and almost 1 million homes underwent major renovations in 1999, up from 680,000 in 1985.

In fact, homeowners spend about $180 billion dollars annually on residential remodeling — almost as much as on new construction. Whereas changes in housing preferences and lifestyles were once measured by the characteristics of new houses, remodeling has become an increasingly important indicator.

Whether it's constructing a new wing, reconfiguring the existing interior layout, or upgrading a kitchen, major remodeling projects now constitute a significant share of homeowner improvement expenditures, according to the study, entitled “Remodeling Homes for Changing Households.� Over the past 15 years, almost 15 percent of homes had bedrooms added, 20 percent added baths, and 24 percent added other rooms. The average house size has increased from 1,580 square feet in 1985 to today's 1,700 square feet.

The latest permutation in the This Old House trend is that homeowners are more likely to become outsourcing contractors than do-it-yourselfers. With Baby Boomers aging and contemplating retirement, and more single, working professionals buying homes, those with the time to master carpentry increasingly lack the ability and the inclination, and those with the requisite ability lack the time. While the do-it-yourself industry enjoyed a healthy spurt between 1995 and 1997, it slipped between 1997 and 1999 compared with the remodeling industry as a whole. Over the past 15 years do-it-yourself projects as a share of overall spending have declined, according to the report.

New homeowners are the most home-improvement happy. In 1998-99, they accounted for 25 percent of home improvement spending, even though they represented only 13 percent of all homeowners. Trade-up buyers (previous homeowners) lead remodeling spending with an average annual expenditure of $3,840, followed by an average of $2,930 for first-time owners, and only $1,500 for nonmovers. And interestingly, age matters: New owners put more than twice as much money into remodeling a house sold by a someone aged 65 or older than for one sold by someone 35 or younger. The other remodeling big spenders are families adding members to their households, be it a child, elderly parent, or spouse. In fact, growing families with new children spend over 80 percent more on contracted projects than other homeowners.

The locus of change is also shifting. Most home improvements are made 25 to 30 years after construction. While houses of the postwar construction period were concentrated in the Northeast and Midwest, the current spate of homes ripe for remodeling are found in the South and West. Texas, Florida, and Arizona are likely to experience the next wave of remodeling activity, along with cities like San Diego, Salt Lake City, and Denver. Houses in these areas — products of the building boom of the 1970s — were bought primarily by youthful Baby Boomers. Such homes tended to be small and simple — characteristics now considered far from fashionable — and ready for renovation.

Businesses are already gearing up to help. There are currently more than 171,500 remodeling firms in America (up from 112,500 in 1987), and 200,000 full-time self-employed remodelers. The home improvement market is expected to grow 2.9 percent per year (adjusted for inflation) over the next decade, according to the report. With the population aging and with family size stable, household improvement expenditures in the coming years will more likely go to upgrades and replacements, rather than enlargements, say researchers. Either way, instead of “out with the old, in with the new,� it's out with the old, in with the newfangled old.

For more information, contact Mandy Simon at the Joint Center for Housing Studies, Harvard University, at (617) 495-7640.

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