Last week, CEDIA Market Research Manager Erica Shonkwiler and I traveled to Boston to attend the Harvard University Joint Center for Housing Studies’ Spring Remodeling Futures Steering Committee meeting.
It was chock full of data, most of which I am only able to summarize as it is yet to be published. At the meeting, there was a general sense of optimism regarding the remodel, rental and MDU markets; new housing starts, not so much.
Here are a few takeaways from the meeting:
- There was prevailing optimism revolving around the remodeling industry, predicting strong third and fourth quarter growth. This bodes well for ESCs whose core business includes remodeling.
- Those staying in their current abodes are reinvesting in their homes. While home improvement spending is up, declining home values are hampering home equity loans and lines of credit. Expect smaller projects that are paid out of pocket instead of through a line of credit.
- New housing starts still face serious headwinds; significant pressures remain from the distressed home/foreclosure market. Until the foreclosure market is able to naturally resolve itself, a healthy level of new housing starts is unlikely.
- Foreclosures are continuing to drive down house values, which have likely not yet seen the bottom.
- A second wave of foreclosures from “shadow inventory” may continue to strain new housing starts and existing home sales for several more years.
- There has been a significant decline in homeownership, with a move toward renting. Ironically, with such low housing values and very low interest rates, it is now technically more expensive to pay rent than a mortgage, which hasn’t been the case since the early ’70s.
- There are significant borrowing constraints for all categories (other than those with stellar credit). Getting a mortgage with a <620 credit score is now nearly impossible.
From the numbers Erica and I got to see, it was easy to derive that there is little chance for an aggressive new housing market rebound; instead it will sputter for years. However, this is not bad news for CEDIA members as most CEDIA companies operating today have made the successful transition to a retrofit/remodel-first business plan.
For the foreseeable future, ESCs need to plow ahead with their current business model and not wait with bated breath for a new housing boom, because, much like me having a date with Jennifer Aniston, it’s not happening any time soon.