Harvard researchers predict rebound in remodeling

Woodrow Aames | Improvement Center Columnist | March 30, 2012

The Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University (JCHS) predicts a steady recovery from the worst downturn in recent history. With less mobility created by the housing market crash of the last few years, more homeowners are likely to stay in their existing dwellings, according to the JCHS. Consequently, researchers now predict that homeowners in the aging housing stock will make improvements with long-term paybacks.

Homeowners with properties that are 50 years old or older spent an average of $3,800 on improvements, JCHS reported. The amount is 43 percent higher than expenditures by owners with homes built in the 1980s and 1990s. Areas with high incomes and older housing stocks like Boston, San Francisco and Los Angeles are "well-positioned for an upturn in remodeling activity," according to the study.

Many home improvements are expected in the area of long-term energy improvements, especially for projects that quality for federal energy tax credits. The JCHS found that tax credit-eligible projects increase from under 40 percent of total improvements in mid-2009 to nearly 69 percent by mid-2010. These projects were primarily "professionally installed energy-related replacement and upgrade projects."

Top green projects in 2010 were completed to improve the building envelope (roofing, insulation, windows and doors, etc.), upgrading or replacing HVAC systems, and installing renewable energy systems. Even without tax incentives, the JCHS says, energy-efficient retrofits will grow among homeowners under the pressure of market forces.

"In the next five years," the JCHS says, "growth in the number of households moving into the 55-64 and 65+ age ranges -- when homeowners typically prepare their homes for their retirement years by making aging-in-place retrofits -- is expected to be particularly strong."

The most robust remodeling markets are concentrated along America's coasts. Over the last decade, top spending in home improvement projects (accounting for 31 percent of all spending) was in Los Angeles, San Francisco, Minneapolis, Chicago, Detroit, Boston, New York, Philadelphia, Washington, D.C. and Miami.

Improvements through 2015, the JCHS predicts, will grow at a 3.5 percent average annual pace.

Homeowners will look to modifying their home, rather than increasing space

A National Association of Home Builders (NAHB) study found that more and more homeowners will reverse the trend of creating special rooms into spaces that suit the common denominators of home shoppers. The former trend of creating home offices, specialized man caves, separate dining rooms or workshops should come to a close.

The peak average home size in 2007 at 2,521 square feet has already dropped to 2,400 square feet, according to the NAHB. New homes will probably top out around 2,150 square feet. What this means to homeowners is that remodeling efforts will center on modifying existing space rather than undertaking additions.

In a survey of home builders the NAHB found that half of the contractors expect an end to the traditional living room. Instead, buyers will want to see these often-unused, highly decorated spaces to merge with dining rooms and kitchen areas to create a multi-purpose "great room". Home offices will double up as guest bedrooms; fancy living rooms may double as dens or entertainment rooms.

Professional Builder and Custom Builder editor David Barista told MSN Real Estate that a 15 percent shrinkage in home size is a response to the deflated market and energy improvements may be the critical upgrade that buyers will look for. Water and energy efficiency, green appliances and lighting will add to a home's value in a competitive market. And, as the boomer age-in-place trend continues, expect to find easy-access, single-story homes with downsized rooms to grow in popularity.

Through the downturn, specialized sectors of the home improvement contracting business have experienced limited growth. Projects like improving the building envelope, replacing HVAC systems and installing green, alternative energy systems are hardly the domain of weekend do-it-yourselfers or aging baby boomers.

For those who own old houses, the challenge will be to balance costly upgrades against the need for them. A new complete building envelope can easily cost more than you hope to spend. Typical needs, however, among old stock is for structural or stability improvement, HVAC upgrades, insulation, energy efficient doors and windows, and lighting.

The Department of Energy recommends that you conduct a thorough energy audit to see where you stand. This includes:

  1. Checking for air leaks (outlets, switch plates, window frames, weather-stripping, baseboards and fireplaces)
  2. Inspecting insulation (including gaps in ductwork, fittings, attic spaces and chimneys)
  3. Evaluating your heating and/or cooling systems (especially recommended for systems more than 15 years old)
  4. Determining your lighting requirements on a per-room basis (downsizing wattage where possible and switching to LED or compact fluorescent lamps).

If nationwide remodeling is bound to pick up in 2012, you may want to begin improvements before labor costs rise again.

About the Author

Woodrow Aames has written articles and profiles for Yahoo, Microsoft Network, Microsoft Encarta, and other websites and print magazines around the world. He holds an MFA degree and has taught English abroad.