Jonathan Smoke is chief economist for Hanley Wood and senior vice president of national research and BPM channel for Metrostudy
Baby boomers and upper-income families are the groups most likely to drive remodeling activity over the next decade, Metrostudy’s chief economist forecast today.
Four of more than 60 population sectors — known colloquially as “Elite,” “Family Life,” “Active Adult Elite,” and “Active Adult Feature and Location” — are the major factors in the 30% of U.S. households that account for 45% of all remodeling and replacement projects, Jonathan Smoke told attendees at the 2013 Remodeling Leadership Conference, which began today just outside Washington. Households in these groups are 34% to 60% more likely than other sectors to do a remodeling project and thus deserve your greatest attention, he said.
Remodeling in general is growing at a faster rate this year than previously was forecast, said the executive at Metrostudy, a sister company to REMODELING. One day ago, on May 8, Metrostudy announced that its Residential Remodeling Index (RRI) rose 1.1% from the revised score for the final three months of 2012. It’s the fifth straight quarter of improvement since remodeling activity bottomed out in the summer of 2011 at 82.0. There’s still a ways to go, though, as the latest score of 86.3 means that conditions for remodeling are 86.3% of what they were at the market’s peak in early 2007.
“We are definitely on the road to recovery now,” Smoke said. “… It’s good growth, but not crazy growth.” Of the nation’s 366 metropolitan statistical areas, Metrostudy predicts 331 will show growth this year (averaging 3%), 29 will be flat, and just six will decline.
Smoke said that one reason for his optimism lies in the declining share of home purchases by investors and house-flippers — people who historically haven’t invested in big-ticket remodeling projects when they buy a home. That’s because the percentage of bank-owned and/or foreclosed homes has dropped to the point where “we do not have a shadow inventory of any significance any more,” he said.
At the same time, the annual income level of non-investor home-buying households has been rising to near about $100,000, he said, and wealthier people are more likely to hire remodelers once they buy a home.
“As regular buyers start to take up more of the market, we see more activity [for remodelers] coming,” he pointed out.
Of those potential customers, which four groups are likely to be best? Smoke identified four:
- Family Life: Traditional middle- to upper-class families with two children per household, upwardly mobile circumstances, and annual incomes of $75,000 to $150,000. This group is 52% more likely to remodel than the average household.
- Elite: Annual incomes well over $100,000. Fifty-one percent more likely than the average to remodel.
- Active Adult Feature and Location: Households of people aged 55 and above with income between $50,000 and $100,000 per year. “They are partying because the last kid moved out of the house,” Smoke said. “They’re very oriented toward having their homes easy to maintain.” About 34% more likely to remodel.
- Active Adult Elite: Again, households with people aged 55 and above. Income levels between $75,000 and $150,000 annual. Fewer than 2% have children in the home. Sixty percent more likely to remodel.
So-called “big data” services can help you target these groups down to the ZIP code level, Smoke said. “Data can show you areas of town where you haven’t been lately, but should be,” he noted. “You’ve lasted through the storm. It’s good times ahead.” —Craig Webb is editor-in-chief of REMODELING.