WASHINGTON, D.C. —The housing market will continue to decline through the rest of 2008, gaining some relief from the government tax rebate in the third quarter before showing some modest signs of recovery in 2009.
That seemed to be the consensus among the speakers at the Home Improvement Research Institute (HIRI) Spring Conference, held here April 3. Additional topics ranged from the impact of tightened credit standards on the housing market, to learning from consumers through social networking, to the changing structure of the remodeling market.
Several speakers used the word “recession,” whether to describe the U.S. economy or certain segments of it. “It’s getting harder and harder to believe we won’t move into a recession,” said Steven Wieting, managing director of Citi Economic and Market Analysis, attributing the nation’s economic woes to the after-effects of oil reaching $100 a barrel and the tightening of lending criteria.
According to Wieting, these conditions are not only affecting residential housing, but he expects to see further declines in the commercial market as well. “If they’re not building that housing development in the desert, they’re not going to build the nearby shopping mall a year later,” he said.
Deborah Weinswig, managing director of retailing/broadlines for Citi Investment Research, said 2008 will remain challenging, as home inventory is high, housing prices continue to be pressured, credit availability remains uncertain and overall concerns about the economy continue to inhibits pending in the home improvement sector.
“I don’t know if we will ever get back to the kind of spending we saw in home improvement products during the housing bubble,” said Weinswig, who follows Home Depot, Lowe’s and other home improvement retailers. “Instead of a consumer going out and buying a new washer or dryer, they’re going to try to fix the one they have. Instead of buying a whole new kitchen, they’ll resurface the cabinets.”
Bernard Markstein, staff vp-forecasting and analysis/NAHB Economics, a greed that gloom and doom forecasts have kept some homeowners from tackling home improvement projects for fear they won’t recoup their expenditure. “What you’ve got to sell is not so much, ‘Will I get my money back?’ as ‘What will be my enjoyment of it?’” he told the group of about 100 manufacturers, retailers, distributors and research analysts. “Anyone can make money in an up market. In a down market, it’s not so easy, and that’s where we are trying to find our way.”
Markstein also reiterated Wieting’s point that tighter lending standards have acted as a drag on the housing market. “New and existing-home sales are still declining, but we’re close to the bottom,” he said. In terms of how these declines affect the home improvement industry, Markstein explained that home buyers spend an average of $3,000 the year after purchasing a home, “so if you’re not selling as many homes, there are less expenditures.”
Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University, spoke about the fragmentation of the remodeling industry—with the top 50 players representing just 5.2 percent of the total market. He said remodelers can do better in these difficult economic times by becoming specialized in a certain are a of home improvement. “It’s very difficult for remodeling contractors to go toe-to-toe with suppliers,” he said. “You look like a bigger player if you’re servicing a niche.”
Melissa Heisler, merchandising and communications manager for ITW Brands, which includes Buildex, Ramset and Red Head, has been attending HIRI conferences for the last seven years. “The quality of the research keeps getting better,” said Heisler, who also serves on the HIRI board of directors. “I like the variety of voices—the blend of firm statistical data, qualitative information, how-to in formation and case studies,” she said.
Attendee Karen Wilson, corporate marketing officer for Hyde Tools and another HIRI board member, said the HIRI conference gave her an opportunity to meet industry experts and take information back to her company that can be applied to product development, marketing, strategic planning and sales presentations to buyers . “HIRI has a lot of aggregated and useful data for anyone in the home improvement industry,” she said. “You never know when a driving trend will become important in your segment.”
Other speakers at the conference were James Gillula, managing director, U.S. Government Consulting, Global Insight; Therese Ford Crahan, executive director, NAHB Remodelers; Anita Watkins, senior vp-qualitative, TNS; G. Daniel Sansbury, assistant division chief, Construction Indicator Programs/Manufacturing and Construction Division, U.S. Census Bureau; Ed Hass, senior vp-advanced research methods, International Communications Research; and Fred Miller, managing director, HIRI.