Are people not spending because the economy is weak, or is the economy weak because people are not spending?
This is an instance of the classic problem of infinite regression. You’re probably familiar with the chicken-or-egg formulation, but for centuries, turtles were at the heart of the issue.
The story I know is a variation of one about a lecture on cosmology. In the version as I first heard it, the lecturer is the philosopher Immanuel Kant. Some days after his lecture, during the course of one of his daily walks, he is greeted by a little old lady out tending her garden. After telling him how much she enjoyed the lecture, she challenges his facts. “Everyone knows,” she says, “that the world is flat and rests on the back of a giant turtle.” Kant asks, “And what is the turtle standing on?” The old woman looks at him quizzically and says, “Isn’t it obvious? He’s standing on the back of another turtle.” Trying not to smile, Kant asks politely, “And please tell me what the second turtle is standing on?” The woman looks at him in disbelief, and says, “But it’s so simple, professor. It’s turtles all the way down.”
In the 250 years since this conversation allegedly took place, and despite the best efforts of the Flat Earth Society, almost everyone agrees that the Earth is round. But the infinite regression problem persists, and not just in university lecture halls. In the world of remodeling, the false starts in the spring of 2010 and 2011 have played havoc with businesses and consumer confidence — or is it the other way around?
I think it is safe to say that four years ago — has it really been that long? — the sudden market crash and the hourly news of impending financial doom cast a pall over everyone’s immediate plans for any major spending. But the picture is very different today. Harvard’s LIRA (Leading Indicator of Remodeling Activity) predicts slow but steady improvement in remodeling activity through the third quarter of 2012, then a sharp upturn in the fourth quarter. Our own RRI (Residential Remodeling Index) shows a similar trend and predicts near double-digit growth by 2015. Even new-home construction is poised for growth in many markets.
These are forecasts, of course, but although the U.S. economy isn’t exactly taking off like a rocket, remodelers from around the country are reporting an uptick in sales. It would appear that consumers finally seem ready to open their wallets. Even larger projects are coming back in some places, albeit slowly. Consumers are still cautious, true, but they’re done waiting. If they have the money, they seem more willing to spend it than at any time in the last four years.
Have they embraced the spending paradox? I doubt it. I think they are just tired of waiting. They’ve looked around and realized that they’ve been standing on the back of a turtle standing on the back of a turtle.
And it’s turtles all the way down.
—Sal Alfano, editorial director, REMODELING.