Kermit Baker, Senior Research Fellow at the Joint Center for Housing Studies (JCHS) at Harvard University and the Project Director of the Remodeling Futures Program, recently spoke to EM NARI members at the January dinner meeting and presented his remodeling industry forecast for 2019. The good news: there is still good news. The bad news: the trend is downward, but don’t panic yet. We may be dropping from the 5-7%+ growth of the past couple of years to 4.2% growth, but there’s still growth.
Baker outlined several trends and issues that contribute to the annual forecast, including:
- Recession risks looming
- Falling household mobility rates and impact on remodeling
- Metro areas with strong house prices have dominated national growth, including metro Boston
- “Older owners rock” – Baby Boomers have been doing majority of projects
- Younger homeowners making progress (Millennials and GenXers)
Recession Outlook
Although Baker cites strong GDP growth and unemployment under 4%, potential economic disruptions could be:
- Cyber risks and data breaches
- Potential trade war and/or international slowdowns
- Geopolitical events
- Mounting corporate debt
- Rising government spending and monetary missteps
- Rising interest rates
Baker advised watching for further stock market volatility, inverted interest rate yields, and declines in payroll employment. Of course, the biggest indicator for remodelers would be softer numbers: fewer leads and projects.
Demographic Shifts
The two biggest demographic shifts affecting the remodeling industry are falling household mobility – fewer people moving – and the aging population. In the short term, baby boomers have been keeping remodelers busy since generally they have the most disposable income.
As more GenXers and Millennials become homeowners, this will shift. However, these generation cohorts are creating smaller households at a later age. Other trends include multi-generational households. Another factor preventing younger people from becoming homeowners or “trading up” is the negative equity from the housing collapse that may be keeping some in their current homes and increased student loan debt and tighter lending practices.
On the upside: Metro Boston has a strong housing market with older stock that need repairs, maintenance and renovations. An aging population provides opportunity for universal design retrofits and aging-in-place remodeling.
Bottom Line
Baker also spoke about contractor payroll and what that portends for the industry. The statistics show a puzzling trend: less productivity. Possible reasons behind this is an aging workforce, higher pay scale, higher material expenses and added costs from regulations.
Finally, the overall outlook as mentioned above, is sunny with 4.2% projected growth in the remodeling industry. Opportunities still exist in the Boston metro market.
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Also at our January meeting, we inducted the 2019 EM NARI Board of Directors.
Pictured: Front Row: Bill Farnswort, Peter Feinmann, Kelly Pappas, Kathy DeMeyer, Cathy Follett, Stephen Ross, Eric Adams, Asher Nichols, Justin Zeller Back Row: Ron Peik, Von Salmi and Jim Lavalle
Special thanks to our January dinner meeting sponsor Resource Options, Inc.
ROI is a full-service construction, design, environmental services staffing and emergency response firm. Learn more at www.resourceoptions.com