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(Orlando, FL) The United States home improvement market has grown to nearly one-quarter trillion dollars, according to a new report released by the Joint Center for Housing Studies’ Remodeling Futures Program. Fueled by the homeownership boom, as well as strong income growth among high-earning households, improvement spending has climbed steadily for a decade. "Households with incomes of $120,000 and up have been responsible for some 60 percent of the growth in spending since 1995," explains Nicolas P. Retsinas, Joint Center director. "The most popular types of projects are high-end improvements, such as major kitchen or bath remodels or room additions. Households spending at least $25,000 on improvements accounted for almost one-third of all remodeling expenditures in 2003."
The most recent report in the Improving America’s Housing series, The Changing Structure of the Home Remodeling Industry, examines significant demand and supply shifts. While the baby boomers still account for the majority of the market, members of Generation Xwhich includes millions of foreign-born and minority householdsare moving rapidly into homeownership. These younger, more diverse homeowners are now reshaping the mix of demand for remodeling projects. "Gen X-ers already rival baby boomers in per household spending," remarks William C. Apgar, senior scholar at the Joint Center for Housing Studies. "Over the past decade, minorities in general, and Hispanics in particular, have become a rapidly growing market segment."
The report also accesses changes in the structure of the remodeling industry. While the home improvement industry has come into its own as a major force in the US economy, its organizational structure is locked in the past. "To achieve its growth potential," notes Kermit Baker, director of the Remodeling Future Program, "the industry must ensure that manufacturers and distributors of home improvement products, as well as firms providing financing to this segment, continue to serve its contractor base."
The home improvement market is poised for further expansion. To ensure this growth, however, remodeling contractors will have to respond strategically to the increasing importance of the high-end market and changes in the way building products are distributed. Certain near-term threatsa sharp drop in home prices, a spike in mortgage rates, or a dramatic slowdown in home salescould also put a damper on spending. "While these risks do bear watching, they are easily exaggerated," concludes Retsinas. "Continued growth in homeownership, along with record levels of income and wealth, make it much more likely the remodeling sector will be able to sustain three percent average annual real growth over the next decade."
A fact sheet for The Changing Structure of the Home Remodeling Industry may be found on the Joint Center for Housing Studies website.
The Remodeling Futures Program, launched in 1995, is producing a better understanding of the US home improvement industry so that businesses can better take advantage of the opportunities that this market offers. A collaborative undertaking among university researchers, government officials, industry analysts, and industry associations, the program seeks to answer questions of how remodeling fits into the residential construction industry including demographic trends, housing and tenure characteristics, regional characteristics of remodelers and remodeling contractors, and the evolving structure of the building materials industry. The Remodeling Futures Program is a research program within the Joint Center for Housing Studies at Harvard University.
The Joint Center for Housing Studies of Harvard University is the nation’s leading center for information and research on housing in the United States. The Joint Center analyzes the dynamic relationships between housing markets and economic, demographic, and social trends, providing leaders in government, business, and the non-profit sector with the knowledge needed to develop effective policies and strategies. Established in 1959, the Joint Center is a collaborative unit affiliated with the Graduate School of Design and the Kennedy School of Government.
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