WASHINGTON, Jan. 14 (UPI) -- Along with what has been an extended boom in home construction and ownership has been an equally strong trend in home remodeling -- with homeowners upgrading on everything from kitchens to more luxurious bathrooms.
According to a report released Thursday by Harvard University Joint Center for Housing Studies' Remodeling Futures Program, the U.S. home-improvement market has grown to nearly one quarter-trillion dollars. Spurred by the boom in homeownership, as well as strong income growth among high-earning households, home improvement spending has climbed steadily for the last decade.
"Households with incomes of $120,000 and up have been responsible for some 60 percent of the growth in spending since 1995," said Nicolas P. Retsinas, Joint Center for Housing Studies 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 center's most recent report to come out of its "Improving America's Housing" series, "The Changing Structure of the Home Remodeling Industry," examines significant demand and supply shifts in the industry. The center's study reports that while the baby boomers still account for the majority of the market, members of Generation X -- which includes millions of foreign-born and minority households -- are moving rapidly into homeownership. These younger, more diverse homeowners are now reshaping the mix of demand for remodeling projects, the report notes.
"Gen X-ers already rival baby boomers in per household spending," said 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 looks at what it criticizes as a old-fashioned business model for the remodeling industry. According to the report, while the home-improvement industry has come into its own as a major force in the U.S. 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, the report notes. 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.
The industry also faces various risks in the near future. Such things as a sharp drop in home prices, a spike in mortgage rates, or a dramatic slowdown in home sales, could put a damper on spending.
"While these risks do bear watching, they are easily exaggerated," said center head 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 3 percent average annual real growth over the next decade."
Launched in 1995, The Remodeling Futures Program is part of Harvard's Joint Center for Housing Studies. 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.
The Joint Center for Housing Studies specializes in information and research on housing in the United States. The center analyzes the dynamic relationships between housing markets and economic, demographic, and social trends with the aim of providing government and business leaders background for developing 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.
