The Remodeling Market International Builders Show January 21, Paul Emrath VP-Survey and Housing Policy Research

Transcription

1 The Remodeling Market International Builders Show January 21, 2010 Paul Emrath VP-Survey and Housing Policy Research

2 Outline NAHB Remodeling Market Index (RMI) NAHB forecasts Legislative/regulatory developments Impacts of remodeling on income, jobs, taxes

3 Remodeling Market Index Quarterly survey of professional remodelers 400+ responses per quarter (500+ for 2009 Q4) Series of questions on whether conditions have improved or gotten worse since previous quarter Two indices: Current conditions (remodeler ratings of major adds & alterations, minor adds & alterations, maintenance & repair) Indicators of future activity (appointments for proposals, calls for bids, commitments for work, backlog)

4 Index NAHB Remodeling Market Index (Seasonally Adjusted): Current Market Conditions 60 better/worse line st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr Source: NAHB Economics and Housing Policy Group: Remodeling Market Index, Qrtly. Survey of Remodelers.

5 Index NAHB Remodeling Market Index (Seasonally Adjusted): Indicators of Future Activity 60 better/worse line st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr st Qtr Source: NAHB Economics and Housing Policy Group: Remodeling Market Index, Qrtly. Survey of Remodelers.

6 NAHB Remodeling Market Index (Seasonally Adjusted) 2009 Q1 Q2 Q3 Q4(P) CURRENT MARKET CONDITIONS Major Additions And Alterations ($25,000 or more) Minor Additions And Alterations (Less than $25,000) Maintenance and Repair INDICATORS OF FUTURE ACTIVITY Calls for Bids Amount of Work Committed for next 3 months Backlog of Remodeling Jobs Appointments for Proposals Source: NAHB Economics and Housing Policy Group: Remodeling Market Index, Qrtly. Survey of Remodelers. P = Preliminary Numbers

7 NAHB Forecasts Residential Fixed Investment (RFI) a component of GDP Remodeling a component of RFI Less information available due to cutbacks at Census Bureau SORAR discontinued No maintenance and repairs No improvements in rental properties Lobbying efforts for new Census remodeling survey ongoing NAHB forecasts Census series, integrates into GDP forecast

8 20% Real GDP Growth Q/Q Percent Change, SAAR 15% 10% 5% 0% -5% -10%

9 Residential Fixed Investment 900 Billions 2005$, SAAR

10 Residential Remodeling: Owner-Occupied Improvements 160 Billions 2005 $, SAAR

11 Influences on Remodeling Markets Generally weak economy labor markets consumer confidence Problems with home equity loans Values fall, equity reduced Sometimes made worse by faulty appraisals Even with equity, lenders reluctant Competition from builders diversifying into remodeling Legislative/regulatory developments Lead based paint Green remodeling Remodeling induced by Home Buyer Tax Credit

12 10 Employment Change Q/Q Percent Change, SAAR (00,000)

13 12 Unemployment Rate Percent

14 Consumer Confidence/Sentiment Conference Board Consumer Confidence Index U of Michigan Consumer Sentiment Index

15 200 House Prices January 2001 = Case-Shiller FHFA

16 5.0 House Prices Relative to Income Median House Price / Median Income Avg =

17 House Prices and Income Trend, Peak and Current 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% 220% 240% U S O H M I N V G A N H I N A R A L N M W Y A Z A K C A W V M T M O C O K S I L I D C T M N T N R I M S H I S D K Y N E N D F L O K M E S C I A U T T X V T D E N C P A M A L A V A W I W A O R D C N Y M D N J Percentage of Historical Trend Source: US Census Bureau, National Association of Realtors FL CA NV AZ

18 NAHB HMI Builder Survey: Have you experienced appraisals Below sales price? Below cost? No, 41% Yes, 59% No, 44% Yes, 56%

19 Survey of Builders: If diversified in 2009 or plan to diversify during in 2010, into which activities? Source: BEC Survey, Dec NAHB Echp. Competition from Builders NAHB HMI Builder Survey: If diversified in 2009 or plan to diversify during 2010, into which activities? Residential remodeling 66% Commercial remodeling 26% Light commercial construction 24% Subcontracting Source: BEC Survey, Dec NAHB Echp. Owning/operating/managing real estate Other 17% 22% 25% No, no plans 35% Source: BEC Survey, Dec NAHB Echp.

20 Lead Based Paint Regulation Rule will take effect on April 22, 2010 As first proposed, mandated lead-safe work practices in pre homes with pregnant women or children work area containment prohibited practices waste disposal clean-up In October, EPA proposed extension to cover all pre-1978 housing, irrespective of occupants Cost of compliance could discourage home owners from hiring professional remodelers

21 Professional Remodeling Jobs And Units Targeted by Lead Paint Regulation Jobs in Units Built 1980 or Later 31% Jobs in Units Built Before % Source: NAHB tabulations of data from the 2007 American Housing Survey, U.S. Census Bureau and HUD

22 Green Remodeling American Existing Home Retrofit Tax Credit (25C) Extended through 2010 & increased by ARRA legislation 30 percent of cost, up to $1,500 Wind, Solar, Geothermal and Fuel Cell Tax Credit (25D) 30 percent of cost, no cap In effect through 2016 Pending federal legislation (e.g., Home Star Retrofit Bill) State programs RMI survey periodically contains special green-related questions Most recently, Q3 2009

23 Calls for work to improve the energy efficiency of the home during the last 3 months Increased significantly 5% Increased somewhat 25% No change 61% Decreased somewhat 5% Decreased significantly 4% Source: Remodelers Market Index Special Questions, 3 rd Qtr. 2009, NAHB EcHp. 0% 10% 20% 30% 40% 50% 60% 70%

24 Calls for work to improve the energy efficiency of the home during the last 3 months - HISTORY rd Quarter 3 rd Quarter 3 rd Quarter 4 th Quarter Increased Significantly 5% 5% 2% 3% Increased Somewhat No Change Decreased Somewhat Decreased Significantly Responses Source: Remodelers Market Index Special Questions, 3 rd Qtr. 2009, NAHB EcHp.

25 Top 5 energy related savings products commonly installed during the past 3 months Low-e windows 87% Upgraded insulation 70% Argon gas windows 60% Insulated exterior doors 58% High efficiency HVAC systems 53% Source: Remodelers Market Index Special Questions, 3 rd Qtr. 2009, NAHB EcHp. 0% 20% 40% 60% 80% 100%

26 Top energy related savings materials and products Increase in use from On demand water heaters 13% 33% UV coated windows 25% 39% Argon gas windows 49% 60% High efficiency kitchen appliances 34% 43% Source: Remodelers Market Index Special Questions, 3 rd Qtr. 2009, NAHB EcHp. 0% 20% 40% 60% 80%

27 Green Practices Adopted by Remodelers Use material/products easily available Use energy efficient windows Use energy star appliances Use alternative to dimensional lumber Use OSB rather than plywood 94% 91% 86% 83% 78% Use recycled and recyclable products Use water sense fixtures and/or toilets Waste management system 51% 61% 70% Other 5% Source: Remodelers Market Index Special Questions, 3 rd Qtr. 2009, NAHB EcHp. 0% 20% 40% 60% 80% 100%

28 Percent of jobs completed in 2009 using the federal 25C & 25D energy efficiency tax credits 0% 40% 1 % to 24% 45% 25% to 49% 10% 50% to 74% 3% Median = 5% 75% or more 2% 0% 10% 20% 30% 40% 50% Source: Remodelers Market Index Special Questions, 3 rd Qtr. 2009, NAHB EcHp.

29 Home Buyer Tax Credit $8,000 credit for first-time buyers expired after Nov 2009 Worker, Homeownership, and Business Assistance Act Extended credit through sales contracts signed by April 30, closed by June 30, 2010 Relaxed income limits New $6,500 credit for repeat buyers Impact on remodeling?

30 Analyzing a Home Buyer Tax Credit: Buyers spend more than average on remodeling Single-Family Detached Home Owners' Average Annual Spending on Various Items 1st Year After Buying Home New Home Existing Home Non- Moving Ow ners Property Alterations & Repairs: Bathroom/ Kitchen/ Room addition $0 $127 $72 Other addition $0 $220 $117 Bathroom/Kitchen remodeling $231 $695 $325 Other interior remodeling $44 $394 $130 Painting $158 $266 $119 New fence $219 $128 $45 New drivew ay or w alk $339 $80 $51 Other outside addition or alteration $1,377 $410 $179 Total alterations and repairs $4,275 $4,642 $2,413 Source: NAHB tabulations of data from the Consumer Expenditure Survey, U.S. Bureau of Labor Statistics. See Spending Patterns of Home Buyers

31 Annual Spending on Repairs and Alterations: Differences persist after statistically controlling for characteristics of buyers Typical New Home Buyer After Buying a New Home If Not Moving Difference $4,965 $4,225 $740 Typical Existing Home Buyer After Buying an Existing Home If Not Moving Difference $5,965 $3,955 $2,010 Source: Results of NAHB statistical model based on data from the Consumer Expenditure Survey, U.S. Bureau of Labor Statistics. See Spending Patterns of Home Buyers

32 Effects of Extended Home Buyer Tax Credit Number of new first-time buyers as a result of the policy Number of additional trade-up buyers as a result of the policy Credit users for whom the incentive was not necessary 46,437 69,656 5,267,192 Summary of Estimated Impacts, First Year After Enactment 1. Changes in sales and acquisitions A. Initial induced sales and acquistions 116,093 housing units B. Ripple sales from displaced owners buying homes 63,286 housing units C. Vacant units absorbed 26,403 housing units D. Rented units sold to owner-occupiers 20,109 housing units 2. Net changes in new construction A. Additional single family homes built 38,472 housing units B. Additional multifamily condominiums built 1,411 housing units C. Additional manufactured housing produced 2,772 housing units D. Impact on multifamily rental production -751 housing units E. Aggregate net change in the value of new construction $9,839 million 3. Impact of additional home transactions A. Broker services $1,435 million B. Transaction-related spending $945 million C. Property alterations $124 million D. Appliances and furnishings $180 million E. Aggregate increase in spending $2,684 million Source: NAHB models that estimate the Economic Effects of a Policy to Stimulate Home Buying

33 Extended Home Buyer Tax Credit: Impact on Remodeling Induced spending on remodeling (in $million) First-time buyers of new single family homes built for sale 1.6 First-time owners of new custom single family homes 0.3 First-time buyers of existing single family homes 27.6 Trade-up buyers of new single family homes built for sale 9.6 Trade-up owners of new custom single family homes 3.3 Trade-up buyers of existing single family homes 81.5 Total Source: NAHB models that estimate the Economic Effects of a Policy to Stimulate Home Buying

34 Economic Impacts of Remodeling NAHB has national and local impact estimates to avoid confusion, pick one & stick with it Key impacts estimated: income jobs taxes Lot of interest in jobs recently Information available on web site

35 Presentation Title 35

36 Presentation Title 36

37 Presentation Title 37

38 Direct Impact of Home Building and Remodeling on the U.S. Economy Table 2. Income and Employment Impacts of New Residential Construction and Remodeling on the U.S. Economy in 2008 Number of Full-time Jobs Wages and Salaries Proprietors' Income Corporate Profits Total Income $100,000 Spent on Remodeling All industries 1.11 $52,709 $13,810 $16,147 $82,667 Construction 0.54 $25,573 $6,601 $4,232 $36,406 Manufacturing 0.18 $8,136 $824 $4,529 $13,489 Wholesale and retail, Transportation and warehousing 0.16 $6,432 $849 $2,307 $9,588 Finance and insurance 0.02 $1,487 $71 $1,459 $3,017 Real estate and rental and leasing 0.01 $315 $1,652 $758 $2,725 Professional, Management, administrative services 0.12 $6,970 $2,191 $764 $9,924 Other services 0.09 $3,797 $1,623 $2,098 $7,518 Source: NAHB estimates, b ased primarily on the data from the U.S. Bureau of Economic Analysis.

39 Direct Impact of Home Building and Remodeling on the U.S. Economy Table 3. Fiscal Impacts of of New Residential Construction and Remodeling in 2008 Average New Single Family Home Average New Multifamily Rental Unit $100,000 of Remodeling Total government revenue generated $89,216 $33,494 $30,217 Federal $66,467 $24,867 $23,656 Income taxes paid by employees $11,791 $4,452 $4,271 Income taxes paid by businesses $30,053 $11,120 $10,485 Social security taxes $22,414 $8,468 $8,124 Taxes on production & imports $2,209 $828 $776 State and local $22,749 $8,628 $6,561 Sales taxes $5,169 $1,987 $1,908 Income taxes paid by employees $3,080 $1,163 $1,116 Income taxes paid by businesses $6,586 $2,434 $2,288 Permit, hook-up, impact, etc. fees $7,915 $3,043 $1,250 Source: NAHB estimates, b ased primarily on the data from the U.S. Bureau of Economic Analysis.

40 Jobs and Income (in $Million) from Remodeling Activity Induced by Extended Home Buyer Tax Credit FTE (full time equivalent) workers Wages and Salaries Source: NAHB models that estimate the Economic Effects of a Policy to Stimulate Home Buying Small Business Persons' income Corporate Profits All industries 1, Agriculture, forestry, fishing and hunting Mining Utilities Construction Manufacturing Wholesale trade Retail trade Transportation and warehousing Information Finance, insurance, real estate, rental, leasing Professional and business services Education, health care, and social assistance Arts, entertainment, recreation, food services Other services, except government Government

41 Thank You