An existential question
When I became a home owner in New Jersey, a friend of mine warned me of an unintended consequence.
“Well, there goes your golf game.”
What do you mean?
“It means you’ll be going to the [national home improvement warehouse retailer] every weekend for the next two years. You won’t have time to play golf.”
I’m here to tell you that my friend was wrong. He was wrong because I did not venture each subsequent weekend into a blue or orange big box for the next two years. There were some weekends where I ventured into a locally owned independent hardware store.
But he was right about the impact of housing turnover on home improvement and remodeling spending. And the experience gave me an appreciation for the metric produced each month by the National Association of Realtors: Existing home sales.
But wait! Is there too much emphasis on existing home sales?
That’s the question raised by Matt Saunders, senior vice president of building products research for John Burns Research & Consulting. [The free webinar —“Building Products Growth Amidst Uncertainty” — can be replayed here.]
“This metric gets a lot press,” he said, especially as the figure today is running as low as it was during the great financial crisis. “But we think the low turnover isn’t nearly the headwind for remodeling that it’s made out to be.”
For one thing, he pointed to survey results from 500 professional remodelers who were asked what’s holding them back from achieving stronger growth. Turnover was nowhere near the top of the list.
“Consumer uncertainty” (23 percent), “skilled labor availability” (22 percent),”higher financing costs of remodeling” (16 percent), “building material costs” (14 percent) and “competitive pressures” (7 percent) all ranked above “weak existing home sales” (6 percent).
For another thing, while it is definitely true that recent movers do spend more on average, there are just a lot more households out there who haven’t moved and don’t intend to. Saunders pointed to a stat showing that only one out of every four remodeling dollars is spent by recent movers and owners preparing there homes for sale.
The question being asked isn’t the right question, he suggested. Instead of: “Do recent movers spend more on average?” It should be: “What share of remodeling spending is driven by movers as opposed to non-movers.”
In Saunders' view, existing home sales are an important metric but overrated in creating a picture of remodeling.
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