Friday, January 28, 2005

Housing boom spawns a home-repair craze

By Kenneth R. Harney/ Housing Update
Friday, January 28, 2005
WASHINGTON - A new study finds Americans spend nearly $250 billion annually on home improvements - much of it on high-end kitchens or other big-ticket projects.
Baby boomers - those born between 1946 and 1964 - especially spend big, according to the report, produced by Harvard University's Joint Center for Housing Studies.
Researchers found that 60 percent of baby boomers completed home-renovation projects in 2003, spending a collective $72 billion.
But Generation Xers (those born between 1965 and 1974) are rapidly catching up. From 1995 to 2003, the number of Gen Xers who owned homes tripled - and their remodeling expenditures soared more than fivefold.
The Harvard report looked primarily at home-renovation spending.
But along the way, the study also uncovered some interesting facts about America's socioeconomic climate. For instance, the report found that:
The income gap between rich and poor households is widening. The average income for the top 20 percent of households is now 15 times that of the bottom 20 percent. That's up from less than 9-to-1 in 1975.
Among the top 25 percent of households in income terms, 90 percent own their own homes. By contrast, only 49 percent of the bottom 25 percent own their own residences.
Minority and immigrant families accounted for 35 percent of all first-time home buyers during 2003.
Home-equity growth among all categories of owners powered consumer spending in recent years, greatly softening the 2001-02 recession.
Not only did home-equity gains produce a ``wealth effect'' - giving homeowners enough confidence to buy goods and services - they also produced the necessary cash. Homeowners pulled out $333 billion in home equity via cash-out refinancings between 2001 and 2003. That's nearly triple the preceding three years' level.
Some interesting facts the study uncovered about home-renovation spending:
One-third of all cash-out-refinacing proceeds go toward home improvements.
Homes worth $400,000 and up represent just 11 percent of total owner-occupied units. But owners of these homes accounted for 43 percent of all 2002-03 spending on additions, and about a third of expenditures on kitchen and bathroom remodeling.
All but 15 percent of the $40 billion the high-end homeowners spent on home renovations in 2003 went to professional contractors. By contrast, those who owned homes worth $100,000 or less spent some 33 percent of their home-repair funds on do-it-yourself projects.
Some 41 percent of Gen Xers' home-improvement spending went toward do-it-yourself projects. By contrast, only 26 percent of baby boomer's home-improvement money covered do-it-yourself work.