Minneapolis Home Improvement Projects: Harvard Housing Report On Unexpected High Home Improvement Demand
The demand for home remodeling is on the increase. The U.S. Housing Stock: Ready for Renewal Report released January 23, 2013 explains the expected changes in demand for home improvements over the coming decade. Sustainable home improvements are gaining in popularity. Wayzata home renovations are paying off handsomely for those investing in their home's future value.
Improving America's Housing Report
Improving America’s Housing is a report prepared biennially by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. In the 2011 calendar year, the average Minneapolis area homeowner spent in the middle range of $2,700 – $2,900.
Joint Center for Housing Studies at Harvard
Following home improvement remodeling data and trends, the Joint Center for Housing Studies at Harvard estimates that spending on home improvements increased about 9 percent in 2012. In 2011, improvement spending on distressed properties was estimated to be almost $10 billion. Housing starts also climbed almost 30 percent in 2012, while existing home sales surpassed the 4.0 million mark for the first time. An appraiser must give account for the home value they access, using data analytics and algorithms that crunch the numbers for them.
Harvard Findings in the Ready For Renewal covered in the IMPROVING AMERICA’S HOUSING 2013 Report:
More than a quarter of 2012 spending was discretionary and could have been deferred. Discretionary home improvement projects include kitchen and bath remodeling, room additions, other major interior improvements and outside attachments.
82 percent of home improvement and repair spending went to owner-occupied homes, with the remaining slice to rental units.
Residential fixed investment, which includes home building and home improvement spending, fell from a 5.2 percent average share of gross domestic product (GDP) during the 20 years prior to the Great Recession to a mere 2.8 percent between 2008 and 2012.
Historically, Minneapolis housing has ranked in the top 10 markets for average per-owner spending on home improvements.
Spending on discretionary home improvements, particularly upper-end remodeling projects by high-spending households — comprises the lions share of the remodeling industry more than the number of households undertaking projects.
Over 40 percent of remodeling expenditures were for replacements (such as roofing, siding, windows, and doors) and plumbing, electrical, and HVAC systems upgrades.
12 percent went for interior upgrades to flooring, paneling, ceilings, and better insulated homes. Destiny Homes helps homeowners determine how much insulation their home needs to bring their insulation's R-Value up to appropriate levels.
22 percent was for other property improvements such as garages, driveways, fencing, patios,and disaster repairs.
Home prices in neighborhoods with higher levels of home improvement spending appreciate more rapidly.
"We are predicting slow and steady growth in remodeling activity throughout 2013 and 2014," said Paul Emrath, NAHB's vice president for survey and housing policy research. "That outlook is consistent with the indicators of future activity in our recent Remodeling Market Index (RMI) survey. Many remodelers are reporting increases in calls for bids and appointments for proposals, so now it's a question of how quickly they can convert those calls and appointments into actual work."
Owners with Greater Equity in Their Homes Generally Spend More on Improvements
$100,000 among metros with the lowest spending, the share of such households was only 26%.
Expanding Market For Home Improvements
Prior to the upticks in home prices in 2012, the housing market "experienced years of underinvestment in the nation’s housing stock", according to the report. Homeowners who have ridden out the market lows are now needing and ready to engage the home improvement projects accruing on their "To-Do Lists". The positive timing of the housing recovery and homeowners catch-up need to keep a home well maintained and repaired is expected to expand the market for home improvements in 2013.
During the housing market downturn, some luxury home owners held off on upper-end discretionary improvement projects, such as major kitchen remodels, room additions and bath remodels. With an increases in the number of homeowners now moving ahead, many home design and building contractors finished 2012 strong and anticipate an even better 2013.
Home Builders Find Buyers Willing To Pay Extra For Green Homes
According to the report, home improvement projects intended to increase environmental sustainability are likely to account for a growing share of dollars spent on home remodeling. Home builder efforts to build green homes are rewarded in the marketplace, by home buyers who are willing to paying premiums of nearly 10 percent for new homes that carry a green home certification.
Foreclosed Homes Needing Home Renovations Generated $10 Billion In Home Improvement Spending
The report highlights the growing supply of homes that have been through the protracted foreclosure process represents a major opportunity for home remodeling contractors. In 2011 alone, renovations of just over a million distressed properties generated about $10 billion in home improvement spending. With nearly 3 million additional homes currently in or at risk of foreclosure, many more billions must be spent to upgrade these properties for return to the housing market through home renovations and remodels to make them suitable once again to be owner-occupied. The Minneapolis housing market experienced a tremendous influx of home investors in 2012 who bought up Twin Cities foreclosed homes for the purpose of renovating them and investing in their home values for a later return.
Family Owned Construction Firms Make Up The Bulk Of The Home Improvement Industry
With small family owned construction firms so prevalent, the remodeling industry remains much less concentrated than other housing-related
industries. The details in the report are stark: "The 50 largest general remodeling companies generated less than 8 percent of total industry receipts in 2007. In contrast, the top 50 home builders were responsible for more than 40 percent of industry receipts". Smartly run home contracting businesses that overcame the housing market swings are now seeing significant payoffs in terms of increased home improvement revenues and improved labor productivity.
According to member censuses by the National Association of Home Builders (NAHB), the share of single-family home builders that reported residential remodeling as a secondary activity increased steadily from 44 percent in 2008 to 51 percent in 2011.
While comprising a smaller sector of the home improvement industry, half of larger remodelers posted annual revenue growth of 5.1 percent or more in 2010 and 3.6 percent or more in 2011.
Older Homes Gain Value Through Retrofitting Improvements
Older homeowners are retrofitting their homes to accommodate their future needs and upgrades to maintain a home. Due to colder winters Minneapolis home builders frequently see requests for better home insulation. Both homeowners of older homes and higher incomes yield greater homeowner spending on improvements. "Among metros with the highest improvement spending per household in 2011, 42% of homeowners earned above $100,000," according to the Harvard report. "We have seen an increase in high-ended, showcase home remodels in existing homes, including historic Minneapolis homes." notes Sprenger.
Given that homes account for about 22 percent of all US energy consumption, the potential benefits from additional older home retrofits are significant. "In fact, bringing homes built before 1970 up to the efficiency levels of the newest stock would cut total residential energy use by 10 percent," states the report. Bringing more the the Twin Cities older homes, many of them stately mansions, up to the efficiency of homes built in the 1970s or 1980s would save about 5 percent of current residential energy consumption.
"The upturn in the residential markets can also be seen in the number of residential housing sectors that reported growth this quarter. While the major home improvement sectors (additions and alterations, as well as kitchen and bath remodeling) have been relatively strong." ~ American Institute of Architects (AIA)
Move-Up Market Home Buyers
75.1 % of the average local community has some form of a move-up buyer. This trend started in 2012 and is expected to be even higher in 2013. After reaching record lows in 2012, mortgage rates are expected to creep up slowly in 2013, the Mortgage Bankers Association is predicting. If you are not buying a home to flip and sell, or for a short-term time, homeowners can bank on their home values will increase.