HIRI crunches the numbers

WASHINGTON, D.C. -- The Home Improvement Research Institute (HIRI) brought its spring conference here yesterday, along with the theme: "Home Improvement in Challenging Times." The event had plenty of data to support its thesis, but there were also some positive interpretations of data.

"The tide is not rising now," said HIRI executive director Fred Miller, referring to spending on home improvement during his welcoming remarks. "We're at two years of decline and a projected third year of decline, which is really unprecedented in the home improvement industry."

Still, Mark Delaney, director of home improvement for the NPD Group, expressed an attitude of "cautious optimism," based on responses from the group's 70,000-strong consumer panel. "Smaller projects are still very much in play," said Delaney. "Of course, I won't imply the installation desk is doing the same amount of business."

Of the most common home projects -- identified by NPD research as those involving lawns, kitchen, landscaping, living room, porch and trees -- all were trending down from year-ago levels. But they also all shared upward movement in early 2009.

"Almost all of them do have a slight uptick," Delaney said. "One month, two months do not make a trend, but a lot of us are searching for light at the end of the tunnel."

Delaney referred to research that asked consumers what projects they were planning. The least common projects involved exercise room, den/library, attic, siding, heating/cooling and electrical/plumbing. (This last category is actually a bright spot at home improvement retailers, but it's not the kind of project which consumers plan ahead for.)

One chart from James Gillula, managing director, consulting services for IHS Global Insight carried the title, "Bad news almost everywhere for consumer finances." Negative forces -- from falling employment to mounting debt burdens -- outnumbered positive forces on the chart 7 to 2. Lower gas prices and more fiscal stimulus were the lone factors on the positive side of the ledger.

IHS Global's forecast for home improvement products market showed a baseline forecast of negative 6.4% for 2009, rebounding to positive 6.9% in 2010, and showing a double-digit increase in 2011. Household formation is one factor in favor of the home improvement industry, he said.

Some in attendance, pointing to national employment concerns, questioned the optimistic forecast.

"The Great unknowns are unexpected shocks to the financial system that undermine the investment markets for our households." said Gillula.

Presenters from Morgan Stanley kicked off the event with a Wall Street view of the home improvement industry. Gregory Melich described the industry as fundamentally a profitable and sound business that is better positioned in today's economy than most of the retail industry.

Other presentations included an examination of the U.S. Department of Urban Development's biennial American Housing Survey and consumers trends, as seen by consulting firm Retail Forward. 

The event took place at the Washington, D.C., headquarters of the National Association of Home Builders.