Remodeling: The New Trend

With housing starts beginning to slow down, home remodeling is becoming more popular. It's estimated that homeowners spent $210 billion on residential remodeling last year, a 5.8 percent increase from 2004.

It's estimated that homeowners spent $210 billion on residential remodeling last year, a 5.8 percent increase from 2004. This is according to the National Association of Home Builder's analysis of the U.S. Census Bureau's third-quarter remodeling spending figures for 2005, released at press time.

And 2006 could see the largest increase in remodeling spending in 10 years - NAHB's Remodelor's Council predicts a 13.2 percent jump in spending. Why such a big increase? Three not-so-ladylike hurricanes - Katrina, Rita and Wilma - which decimated a good portion of the Gulf Coast.

“[Those] hurricanes, combined with a rebound in the rental market, are expected to spur a historically high increase in spending this year as repair work proceeds in the Gulf states and apartment owners renovate properties to maximize rental income,” says Vince Butler, chair of the Remodelor's Council and a home remodeler from Clifton, Va.

On the building front, the housing market showed signs of cooling in February - single-family home construction dipped 2.3 percent, and multifamily starts fell 30.4 percent. The NAHB expects to see these numbers decline further in the months ahead.

“Last year's record-level of housing starts and double-digit price appreciation were unsustainable,” explains David Seiders, NAHB's chief economist. “With demand slowing, we expect to see price appreciation also falling back into the single-digit range. We anticipate another solid year for housing in 2006, with new-home construction and new home sales down about 7 percent from last year's all-time highs.”

Echo nature's blending of colors and textures in the home to make it more comfortable. Kohler's Sea Salt provides visual texture to sinks, and is versatile enough to encourage a mix of materials in the room.

Teardowns Vs. Makeovers

This could influence one of the biggest construction trends in the past few years - teardowns, where smaller, older homes are razed to the ground and replaced by much larger, expensive residences.

Granted, some of these homes are eye-sores, especially if they've been abandoned for a few years. It's cost-effective to tear them down and start over again. But the controversy comes in when homes or whole neighborhoods perceived as historic or having historic value are torn down to build “McMansions” that engulf the entire lot. In some of these situations, the property is worth more than the house.

The average newly built home in 2004 (the last year that data is available from the U.S. Census Bureau) was 2,349 sq. ft. Compare that to 1970, where the average home had 1,500 sq. ft.; the 1950s saw homes with an average of 983 sq. ft. In 2004, 39 percent of new homes had two bathrooms, 33 percent had 2 1/2 baths, and 24 percent had three or more bathrooms. More than half of the homes had three bedrooms, and 37 percent had four bedrooms. And most of these homes are being built up, not out - 52 percent of new homes built in 2004 were 2 stories or more.

Recent years have seen house prices skyrocket, and many people are experiencing sticker shock as they shop around for a new home. But some builders, such as Yuri Birg of Lincolnshire, Ill.-based Greenview Homes, have tried to counteract this with “makeover remodeling.”

Birg has been part of the teardown mania in the Chicago area for the past few years. But go to Greenview Homes' Web site, www.greenviewhomes.com, and you'll see a button for Makeover™ Homes. These are homes that Greenview has bought and is remodeling, and will be available to buy. Birg says his goal is to have 15-20 “Makeover” homes on the site (www. greenviewmakeoverhomes.com), according to The Chicago Sun-Times.

“Makeover” customers, depending on what stage of the remodel they come in at, can participate in the design of their home through Greenview's design center, which includes a kitchen and bath display.

Real estate agents can also post their potential “Makeover” listings on the site. “When potential home buyers look on our Web site and see a realtor's listing, they understand that for, say, $790,000, we can give them a different house than the $450,000 house listed 'as is' - a house that caters to their interests in a new kitchen, a new master bath and a new family room,” Birg tells the Sun-Times.

The look for the bath is organic. Showhouse by Moen's new Organic bathroom faucets fit the bill as they connect the interior world with the elements of nature, and provide a focal point for upscale powder rooms.

Remodels Pay Off

Kitchens, bathrooms and living rooms are the most likely interior spaces to be improved in existing homes. According to the Home Improvement Research Institute, recent home buyers spent more than $4,900 during the first year. Buyers of older homes spent an average of $3,600, while those who bought new homes spent an average of $7,000. Purchasers of both homes reported that improvements were made to support new features and change décor.

More good news is that kitchen and bathroom remodeling projects are returning more of a homeowner's investment than ever before, according to the National Association of Realtors' 2005 Cost vs. Value Report. The report includes information from NAR members about the resale value of common remodeling projects in 58 U.S. housing markets.

Midrange bathroom remodels are definite money-makers (see Table 1a): the national average cost is $10,499 and the return is $10,727, or 102.2 percent. This is compared with an 87.5 percent return in 2002.

A midrange kitchen remodel, on average, costs $43,862 and the return is $39,920 (see Table 2a); 91 percent of the cost to remodel, compared to 66 percent of the cost to remodel in 2002.

Of course, the desirability of certain remodel projects varies by region. The NAR report notes that Westerners prefer remodeled kitchens; a minor midrange kitchen remodel may return 112.3 percent of the cost. In the Midwest, the same kitchen remodel returns only 85 percent of the cost. Buyers in the South are partial to upscale bathrooms, which return an average of 98.5 percent of project costs (see Table 1b).

The Home Improvement Research Institute cites these statistics on what homeowners may spend on remodeling projects in 2006:

Household improvement budgets will rise to $3,796 this year, up 31 percent from 2000 and 42 percent from 1997.
Half of all “home improvers” will spend more than $2,000, up from 39 percent three years ago. In 2004, more than 6 percent of homeowners spent at least $20,000 on their projects.
Households with incomes of $50,000 or more will spend $4,267 this year, up 12 percent from 2000.

In the kitchen, the sink is probably the most-used feature. Faucets such as American Standard's Culinaire pull-down version have more than a foot of clearance, making it easy to accommodate large pots and pans.

Kitchen/Bathroom Trends

With all this interest in remodeling these days, what are consumers looking for today that they either didn't or couldn't have when they bought their present homes?

“The look is going very organic for the bath,” says Judy Riley, Moen's vice president of design. “Natural elements, including light woods and sandstone, as well as colors such as slate and rich brown, are expected to be very popular.”

To eliminate hard or obtrusive lines, look for fixtures with rounded edges and brushed finishes. Some manufacturers are combining porcelain and china bathroom lavatories with wood vanities.

Echo nature's blending of colors and textures in the home to make it more comfortable. In the kitchen, homeowners can contrast smooth countertops with textured tile backsplashes.

Combining function and style is still a high priority for homeowners. DECOLAV's Anchara 5112T lavatory console has open shelves to store linens and bath essentials, while two moveable drawers supply closed storage.

Kohler designers say the colors of stone, wood, marble and metal are soothing and complementary. The trend of using these natural materials in the home also reflects “a growing desire to balance the many aspects of our lives - work and play, family and personal time.”

Natural flooring - limestone tiles, natural linoleum, cork, bamboo, various hardwoods - is now more available, and many of these also can be used over radiant floor heat.

Traditional styles are always a safe bet, but this year they take a twist, becoming more glamorous, feminine and sophisticated, according to Moen. Look for pieces inspired by the deco and nouveau styles of the '20s and '30s.

Combining style and function is still a priority for homeowners, and manufacturers today are fulfilling that need in many of the products they offer. In the kitchen, the sink is probably the most-used feature, so apron-front sinks with high-arch faucets make moving heavy pots in and out much easier. Combining vanities with bathroom sinks gives more storage options, especially in smaller baths or powder rooms.

A Woman's Castle?

A man's home may be his castle, but the woman of the castle is the boss when it comes to home improvement/remodeling projects. The residential remodeling market accounts for about 40 percent of all home construction, and various studies have shown that women are thought to influence up to 85 percent of home improvement purchases.

This is backed up by two recent studies on the subject. A survey conducted by the National Association of Realtors indicates that women account for 21 percent of home improvement purchases by a single homebuyer, compared to 9 percent for men.

And a ServiceMagic online survey found that 55 percent of its contractor-members believe the woman of the house is the primary decision maker for home improvement projects, while only 17 percent cited men. About 28 percent agreed that couples make decisions as a team.

Of course, homeowners see it a little differently - 25 percent of women polled said female homeowners were the primary decision makers, while only 8 percent of men agreed. About 30 percent of men said male homeowners made those important remodeling decisions, while only 8 percent of women though so.

This gap in perception means communication is important when dealing with any remodeling project - talk to both spouses, even if the women will be making the decisions!

More Remodeling Stats

Bruce A. Carbonari, president and CEO of Fortune Brands Home & Hardware (parent company of Moen), and other Fortune executives discussed the future of the homebuilding and remodeling industry at the recent International Builders Show:

The average age of the housing stock throughout the U.S. is growing older: The median age of existing homes has risen to 32 years old, with the oldest homes in the Northeast and Midwest regions. Major cities in the Sun Belt are also emerging as key remodeling markets.

Curb appeal remains important as homeowners look to update tired, dated exterior. One growing trend is the remodeling of entryways; just replacing the front door can add up to $24,000 to the perceived value of the home, according to a home valuation study by Fortune Brands' Therma-Tru.

About 40 percent of the study's respondents who sold a home prior to their recent purchase said they made improvements to that home to get it ready to sell. The most common improvements prior to sale are interior painting, exterior structural improvements, new flooring, interior structural improvements and replacing cabinetry and countertops. The most frequently improved rooms are kitchens, bathrooms and living rooms.

And from “The Money Pit,” a nationally syndicated home improvement radio show started 10 years ago, co-host Tom Kraeutler says that plumbing-related questions were down a bit in 2005, but the energy-related questions trumped water-saving questions. About 70 percent of the show's audience says they hire professionals for some home improvements.

The top five plumbing-related questions for 2005 were:

Number 5: Is this project worthwhile? Homeowners are trying to decide of their planned investment in a new bathroom or bathroom remodel will deliver the anticipated value and benefits. Remodel contractors need to use their selling skills to determine how each prospect defines value.
Number 4: What type of product is best for my job? Homeowners do their homework; they research products extensively. But they still need a trusted resource to validate the advertising claims they read.
Number 3: How can I keep this clean? Much of this is related to moisture management and mold control. But remodel contractors can also gain a significant selling advantage if they promote product benefits to reduce cleaning chores.
Number 2: How should I do this project? Homeowners want to know which products should be replaced and which they can keep; tricks for saving money to get an updated look, and which parts of the project they can do vs. hiring a pro.
Number 1: How can I fix this problem? Leaks are the number one topic here, followed by toilet performance (or lack thereof). Remodel contractors have an opportunity to promote hassle-free benefits to homeowners.