Renovation Industry Surpasses Pre-Recession Peak
Last week, I attended the Remodeling Futures Conference at Harvard Joint Center for Housing Studies (JCHS). There, JCHS announced that the home renovation market size will have reached $326 billion by the end of 2015, based on data from U.S. Census Bureau, a whooping 1.5 billion above the 2007 pre-recession peak levels, as shown in the chart below.
These market estimates support Q2 Houzz Renovation Barometer findings on the state of the industry as of July 2015. The Barometer revealed that over two-thirds of residential architecture, design, contracting, design-build, and renovation and outdoor specialty companies reported revenues and profits were at or above levels they considered to be “normal” before the recent recession in the first six months of 2015 (see Chart 2 below). Most impressively, a fifth to a quarter of firms reported that business performance was significantly above “normal,” while a quarter to a third reported that performance was somewhat above “normal.”
Furthermore, home professionals on Houzz are highly optimistic about continued market growth into 2016. The Q3 Houzz Renovation Barometer released on October 19, 2015 showed year-over-year index scores above 70 in all the three quarters of 2015, indicating that significantly more firms reported increases in new business activity than decreases in 2015 relative to 2014. These year-over-year increases in the number of inquiries and number and size of new projects are an important indicator that home renovation spending will continue to grow into 2016.
As consumer demand for renovations continues to grow due, in part, to aging housing stock, stable home prices, and aging-related investment by Baby Boomers, the outlook for the industry will continue to be quite positive. However, the industry is running into some challenges that will make it difficult to sustain further expansion, which I will address in my next post.