Remodeling Surging in Houston – And Around the Nation
HOUSTON – (By Dale King, Realty News Report) – The home remodeling market in the U.S. has skyrocketed by more than 50% since the Great Recession of 2007-2009 ended, says a report by Harvard University’s Joint Center for Housing Studies.
Houston and its environs have generally mirrored that ballooning pace, said the owners of two local rehab firms. One service provider, Dan Bawden, owner and president of Legal Eagle Contractors in Bellaire, said he is currently dealing with a number of whole-house remodeling projects with six-figure price tags.
“About 10% of the calls we used to get were for whole-house projects,” he said. “Now, it’s 75 to 80%. When the phone rings with a call for remodeling, there’s an 80 to 90% chance it’s going to be something big.”
Ditto for Leslie King, owner and founder of Greymark Construction in Houston. “Housing prices in Houston have always been affordable. But in the last four years, they have taken off, and because of that, our business has taken off. The value of homes today justifies spending $75,000 to $100,000 on a renovation. It wasn’t like this before.”
The report from the Harvard Center’s Remodeling Futures Program finds that as home construction has struggled to meet the nation’s growing housing needs, spending on improvements and repairs to both owner-occupied and rental properties hit a record level of nearly $426 billion in 2017.
Throughout the U.S., nearly seven million rental and vacant units were converted to owner-occupancy dwellings in 2016 and 2017, and their owners invested $50 billion to improve their condition, the Harvard study says.
New residential construction is slowing recovering, said Abbe Will, associate project director in the Remodeling Futures Program, but the stock of existing homes is also getting old. “The aging of the housing stock has been a boon to the remodeling industry,” said Will, “with spending surpassing investment in homebuilding every year for a decade and contributing 2.2% to U.S. economic activity in 2017.”
The Harvard study adds: “The steady uptick in house prices in many markets and the aging population are also driving increased spending on home improvements and repairs.” People remaining in their homes longer also means they accumulate more equity, and can dip into that financial pool “to afford major renovations, including accessibility modifications that allow them to remain safely in their homes as they age. Households age 55 and over account for half of all improvement spending by homeowners today.”
The Harvard report is packed with figures, graphs and statistics, many of which can be bullet-pointed:
“Some of the recent strength in the remodeling market reflects a significant increase in spending by rental property owners. The surge in rental demand following the housing crisis prompted owners to invest in substantial upgrades to their units.”
“Over the next decade, the strong preference of older homeowners to age in place and the increasing difficulty of building affordable housing will keep the damper on new home construction.”
The national mobility rate – the share of the population that changes residences each year – has fallen by almost half over the past four decades.
“In areas where homeownership is relatively affordable, younger households do contribute significantly more to local improvement spending.”
“Nonetheless, the number of owners under age 35 is finally showing signs of a rebound – and so is their remodeling spending.”
The Harvard report notes that younger people are gaining ground in both the residential buying and remodeling markets. “In particular, younger households contribute significantly more to local improvement spending in many metros across the Midwest and the South, where owning is more affordable than in high-cost metros on the east and west coasts.”
King says she senses the tingle of youthful spending. “It feels like 50% of our revenue is coming from those around age 35,” she said. “The millennials are making money and moving in. They have kids. They come to us to build additions.”
Named Texas Remodeler of the Year in 2015, King has been in the rehab business for 25 years. For a while, she was getting calls from empty nesters looking to remodel kitchens and bathrooms. “Then, a curious thing happened. People around age 35 wanted to be in the city, so they bought homes that were built from the 1920s to the 1940s. They started gutting homes and redoing them. This was a new phenomenon.”
King found her business growing – 20, 25% a year. And it’s still going up. “I don’t see it dropping back. We’re marketing aggressively. We don’t move far from the phone.”
Her words echo one of the conclusions in the Harvard report. It notes: “Given the challenges of building affordable homes in many markets, the remodeling share of residential spending will therefore continue to have a major role to play in meeting the nation’s housing needs.”
Back in Bellaire, Bawden admits the almighty dollar is impacting the overall house purchasing market, a move that opens opportunities for remodeling. “Home prices are edging up. There are government regulations; the cost of building materials is increasing and there are fewer skilled tradesmen – painters, cabinet makers, etc. So the ones available are charging more.”
“People who at one time might have sold their homes are now more likely to stay. So, there is more demand for remodeling jobs.”
In addition, “homeowner spending on repairs following natural disasters totaled about $30 billion, accounting for 6% of home improvement expenditures in 2016 and 2017. Bawden said his firm is still repairing homes damaged by flooding from Hurricane Harvey. “Many homes in Houston remain gutted and unoccupied” due to the high water damage.
At Greymark, King said she only worked on nine homes damaged by hurricane-related flood waters – “past clients or strong referrals.”
“Many flood-damaged homes are paid for, owned by people age 60 and older. In the meantime, they are living in rentals and trying to decide what to do with their homes. They could fix them or they could have them torn down and sell the property. A lot of people are scratching their heads wondering what to do.”
Meyerland, close to Bellaire where Legal Eagle Contractors is located, “is like a ghost town. People are living somewhere else and trying to forget about it.”
Finally, energy-saving renovations – new roofing, windows, HVAC systems and insulation – have been popular, but may be losing their gleam. “The recent moderation in energy prices has reduced the payback from upgrades,” says the report.
Still, weather prognosticators say stronger, more frequent storms may occur in coming years. If that happens, “disaster-related repairs to homes will no doubt increase.”