I was in Lowes this weekend in FL and it was pretty empty. Empty to the point I had no problem getting help. The drop here will happen too. Give it time for JULS to truly reach the end of his credit rope.
Not sure what part of the country are supporting these numbers but here in NH Lowes and HD are dead. No lines on a Saturday and plenty of carts. Weekdays are even worse.
I am not going to spend half of my day studying how the numbers are cruched, perhaps someone more knowledable can comment on my hypothesis. My theroy is that the dominance of the big box stores (HD/Lowes) during the past 5-10 years has expanded what falls under the umbrella of Homeimprovement. HD and Lowes sell appliances, lawn stuffs, and a dozen aother things that may not have previously been considered homeimprovement items.
REBear, heck, all numbers get substantially revised - and maybe these estimate will be revised significantly. Some numbers I use more often, but for home improvement - I don't really know if they are revised more than others.
There's improvement and then there is improvement. I can see a lot of the bogus facelift flipping improvements going away, but if people are stuck in a house and need space then real improvements--adding on a bed and bath, for example or converting a garage or basement to living space--would seem to be a candidate to trend upwards.
There is a Lowe's 45 minutes south of here that was built 3 years ago..it is now completely empty of customers..meanwhile for sale signs here in Taos are sprouting like weeds.
JP, I'm not aware of any more details from the BEA on this line item. This flow to residential investment on the GDP report - and this is from the underlying detail for that item.
It is also worth noting that during the boom, buyers were way more willing to buy homes in need of repairs than they were in the past. Since the bubble burst buyers are really cutting the price when repairs need to be made. Based on that trend it would indicate that during the boom, you really have a boom in marble counter tops. It is now being sustained by necessary repairs that had been put off since the boom began.
Why do you refer to it as home improvement "investment"? It is more appropriately described as "consumption," because it is not designed to generate a return on capital. I think the economic misrepresentation of such activity is among the zeitgeisty background stuff that led many to deceive themselves into the belief that yanking out equity from their home to demolish a perfectly operational kitchen in favor of Viking/granite was an "investment." It was not. It was consumption. You should not propagate the fiction.
Brother-in-law in Cali is in the home remodeling business. Says his phone stopped ring six months ago. Says the only one making money in his town is the local paper, due to printing all the foreclosure notices every day.
My neighbor is almost done putting over 250K into his 560K house bought at the peak. I have no clue where he gets the money. But he know has 750K invested in a house he could sell for about 400K maybe, on a real good day....
"Why do you refer to it as home improvement "investment"? It is more appropriately described as "consumption," because it is not designed to generate a return on capital."
I think that's a good point. Most home improvement is indeed a form of consumption-that bathroom/kitchen renovation loses value the older it gets.
As I noted above, there are ways to actually invest in a home. For example, if I have, say, a 2/1 that I overpaid for and if I can do a lot of work on my own (true sweat equity) in improving that to a 3/2 it is entirely possible I could diminish some or all of the loss caused by my high purchase price while at the same time establishing a permanently higher value for the property.
Of course, one needs additional capital to make that investment....
"Brother-in-law in Cali is in the home remodeling business. Says his phone stopped ring six months ago. Says the only one making money in his town is the local paper, due to printing all the foreclosure notices every day.
Hangtown | 08.05.08 - 11:56 am | # "
He probably has more competition now, too, as custom-home builders start looking for remodel jobs to keep going.
In my experience, there's always somebody in the market for a $10K kitchen remodel. Houses get to be 30 years old, and it's time; or the original kitchen the builder put in was a joke.
There are certain realities that come with a housing market such as this one. First is that the subprime implosion has resulted in an enormous amount of distressed properties on the market. Those properties are a mess because either they were a trash out or because the borrower was so strapped just trying to keep up with their mortgage that there was no cash left over for maintenance. Prices are still too high on those properties and they aren't selling to anyone other than investors because even those who are buying in this market are not going to buy an overpriced fixer - so either the bank fixes the place up (not going to happen) or they have to wait for a flipper/investor who thinks they can clean the property up and make a profit on a sale.
The only thing that is selling in this market currently are "ready to move in" properties that need no maintenance or improvement. They don't have to have granite counter tops, but they have to modernized, clean and well maintained. As Alt-A implodes, you will see a lot more of these properties on the market. Anyone who qualifies for a mortgage and can actually get one right now is NOT going to buy a crappy fixer so those properties are just sitting.
Sensible home improvement (not granite, travertine, and stainless everywhere) will actually pay off for a seller with the kind of inventory overload that is out there right now.
In my experience, there's always somebody in the market for a $10K kitchen remodel. Houses get to be 30 years old, and it's time; or the original kitchen the builder put in was a joke.
Bob Dobbs
Yes and there is a line out the door of available workers wanting to do the job. A few eggs cannot feed a family of 100.
"Yes and there is a line out the door of available workers wanting to do the job. A few eggs cannot feed a family of 100."
I didn't mean to say there'd be enough for everybody, just that some demand would continue. Back in the early '90s, during the last housing bust in California, a lot of contractors went into remodel, but others left the business, or the state, entirely. My contractor neighbor took a municipal building-inspector jo.
I know a couple of guys who keep busy because they're high quality, low-cost and -overhead, and get jobs by word of mouth. Others, not so much. Nobody said free-market capitalism was pretty -- at least, nobody honest.
HD/Lowe's are in the bottled water business now. They bottle and package small bottles, shrunk wrapped, and go clear up to 5-gallon bottles purified by reverse osmosis.
In my experience, there's always somebody in the market for a $10K kitchen remodel. Houses get to be 30 years old, and it's time; or the original kitchen the builder put in was a joke.
Bob Dobbs | Homepage | 08.05.08 - 12:19 pm | #
I've always thought home improvement activity levels are pretty constant overtime - its the price folks pay for it (and how much is bought vs sweat equity) that changes.
I agree with Bob Dobbs - I'm getting ready to remodel my 70 year old kitchen right now and will be going back to known and trusted contractors. I did the bathroom back in February and my tile guys and plumbing contractor both had full schedules. The parts of the market that have largely dried up is the excessive upgrades that aren't going to pay off in a market where prices are dropping. Granite is out, stainless is out, travertine is out unless you are talking about a seriously high end property. A $30k kitchen remodel for my house would be stupid in this market, but a $15k remodel will make a huge difference and be a key element in getting it sold.
Would be great if you could augment this post with a chart showing trends in home improvement expenditure against home building or prices - against a measure that has experienced a significant downturn in the past few years.
Such a graph would give your statement that "This suggests there could be more downside for home improvement, especially with homeowners less able to borrow against their homes." significantly more weight.
Plus, I'd be genuinely curious to see the results!
The only thing that is selling in this market currently are "ready to move in" properties that need no maintenance or improvement. They don't have to have granite counter tops, but they have to modernized, clean and well maintained.
I have troubles in re-calculation your value for "Improvements as % of GDP". My chained2000 number for Improvements is 127495Mn and for GDP 11700.6 Bn. So I get 1.09% for Q2 2008 while your chart show smth closer to 1.25%. Btw, I have no problem in reaching your sing.family % of GDP level, though. Can you confirm your number for 2008?
first time first?
El Segundo.
How long this crisis go?
Home improvement has been and will be sustained by the "improvements" necessary to rejuvenate all of the trashed foreclosures.
I was in Lowes this weekend in FL and it was pretty empty. Empty to the point I had no problem getting help. The drop here will happen too. Give it time for JULS to truly reach the end of his credit rope.
JULS?
this doesn't reconcile with what Lowes' et al have been saying...
Not sure what part of the country are supporting these numbers but here in NH Lowes and HD are dead. No lines on a Saturday and plenty of carts. Weekdays are even worse.
Real home improvement has not started cliffing yet? Why is Home Depot complaining?
On the first graph, it appears as if a rise in home improvement spending could presage the end of recessions, although some see-sawing goes on.
Or, maybe people are secretly living in the 'big box' stores inside the boxes.
I am not going to spend half of my day studying how the numbers are cruched, perhaps someone more knowledable can comment on my hypothesis. My theroy is that the dominance of the big box stores (HD/Lowes) during the past 5-10 years has expanded what falls under the umbrella of Homeimprovement. HD and Lowes sell appliances, lawn stuffs, and a dozen aother things that may not have previously been considered homeimprovement items.
My guess is we are over reporting home improvement investment. Do home investment numbers get substantially revised during a downturn?
REBear, heck, all numbers get substantially revised - and maybe these estimate will be revised significantly. Some numbers I use more often, but for home improvement - I don't really know if they are revised more than others.
Best Wishes.
Are Home Depot and Lowe's selling food now, ala Target....oh, the BEA estimates....well, that explains it.
Home depot just sent me a 12 month interest free thingy.....but I have to "Act now" as it "expires in a week"
Like those won't get extended.....
Ciao
MS
There's improvement and then there is improvement. I can see a lot of the bogus facelift flipping improvements going away, but if people are stuck in a house and need space then real improvements--adding on a bed and bath, for example or converting a garage or basement to living space--would seem to be a candidate to trend upwards.
There is a Lowe's 45 minutes south of here that was built 3 years ago..it is now completely empty of customers..meanwhile for sale signs here in Taos are sprouting like weeds.
Does anyone have a pointer to how these numbers are calculated? I find them a bit surprising (from my superficial view of them).
I'm looking at putting in hardwood floors, and I can tell you, prices are VERY negotiable. Business isn't just down - it's dead.
JP, I'm not aware of any more details from the BEA on this line item. This flow to residential investment on the GDP report - and this is from the underlying detail for that item.
Sorry I don't more.
Best Wishes.
It is also worth noting that during the boom, buyers were way more willing to buy homes in need of repairs than they were in the past. Since the bubble burst buyers are really cutting the price when repairs need to be made. Based on that trend it would indicate that during the boom, you really have a boom in marble counter tops. It is now being sustained by necessary repairs that had been put off since the boom began.
Just an idea.
Why do you refer to it as home improvement "investment"? It is more appropriately described as "consumption," because it is not designed to generate a return on capital. I think the economic misrepresentation of such activity is among the zeitgeisty background stuff that led many to deceive themselves into the belief that yanking out equity from their home to demolish a perfectly operational kitchen in favor of Viking/granite was an "investment." It was not. It was consumption. You should not propagate the fiction.
This is incredible information.
Is this home improvement in China?
Brother-in-law in Cali is in the home remodeling business. Says his phone stopped ring six months ago. Says the only one making money in his town is the local paper, due to printing all the foreclosure notices every day.
George,
You may be onto to something there if the rate of household formation craters due to folks moving in with family to weather the downturn...
My neighbor is almost done putting over 250K into his 560K house bought at the peak. I have no clue where he gets the money. But he know has 750K invested in a house he could sell for about 400K maybe, on a real good day....
"Why do you refer to it as home improvement "investment"? It is more appropriately described as "consumption," because it is not designed to generate a return on capital."
I think that's a good point. Most home improvement is indeed a form of consumption-that bathroom/kitchen renovation loses value the older it gets.
As I noted above, there are ways to actually invest in a home. For example, if I have, say, a 2/1 that I overpaid for and if I can do a lot of work on my own (true sweat equity) in improving that to a 3/2 it is entirely possible I could diminish some or all of the loss caused by my high purchase price while at the same time establishing a permanently higher value for the property.
Of course, one needs additional capital to make that investment....
"Brother-in-law in Cali is in the home remodeling business. Says his phone stopped ring six months ago. Says the only one making money in his town is the local paper, due to printing all the foreclosure notices every day.
Hangtown | 08.05.08 - 11:56 am | # "
He probably has more competition now, too, as custom-home builders start looking for remodel jobs to keep going.
In my experience, there's always somebody in the market for a $10K kitchen remodel. Houses get to be 30 years old, and it's time; or the original kitchen the builder put in was a joke.
There are certain realities that come with a housing market such as this one. First is that the subprime implosion has resulted in an enormous amount of distressed properties on the market. Those properties are a mess because either they were a trash out or because the borrower was so strapped just trying to keep up with their mortgage that there was no cash left over for maintenance. Prices are still too high on those properties and they aren't selling to anyone other than investors because even those who are buying in this market are not going to buy an overpriced fixer - so either the bank fixes the place up (not going to happen) or they have to wait for a flipper/investor who thinks they can clean the property up and make a profit on a sale.
The only thing that is selling in this market currently are "ready to move in" properties that need no maintenance or improvement. They don't have to have granite counter tops, but they have to modernized, clean and well maintained. As Alt-A implodes, you will see a lot more of these properties on the market. Anyone who qualifies for a mortgage and can actually get one right now is NOT going to buy a crappy fixer so those properties are just sitting.
Sensible home improvement (not granite, travertine, and stainless everywhere) will actually pay off for a seller with the kind of inventory overload that is out there right now.
In my experience, there's always somebody in the market for a $10K kitchen remodel. Houses get to be 30 years old, and it's time; or the original kitchen the builder put in was a joke.
Bob Dobbs
Yes and there is a line out the door of available workers wanting to do the job. A few eggs cannot feed a family of 100.
"Yes and there is a line out the door of available workers wanting to do the job. A few eggs cannot feed a family of 100."
I didn't mean to say there'd be enough for everybody, just that some demand would continue. Back in the early '90s, during the last housing bust in California, a lot of contractors went into remodel, but others left the business, or the state, entirely. My contractor neighbor took a municipal building-inspector jo.
I know a couple of guys who keep busy because they're high quality, low-cost and -overhead, and get jobs by word of mouth. Others, not so much. Nobody said free-market capitalism was pretty -- at least, nobody honest.
HD/Lowe's are in the bottled water business now. They bottle and package small bottles, shrunk wrapped, and go clear up to 5-gallon bottles purified by reverse osmosis.
Also, many of our HD/Lowe's here in Central Texas have a fast food stand-alone at the edge of their parking lot, as do service stations.
In my experience, there's always somebody in the market for a $10K kitchen remodel. Houses get to be 30 years old, and it's time; or the original kitchen the builder put in was a joke.
Bob Dobbs | Homepage | 08.05.08 - 12:19 pm | #
I've always thought home improvement activity levels are pretty constant overtime - its the price folks pay for it (and how much is bought vs sweat equity) that changes.
JMHO based on years of anecdotal evidence.
I agree with Bob Dobbs - I'm getting ready to remodel my 70 year old kitchen right now and will be going back to known and trusted contractors. I did the bathroom back in February and my tile guys and plumbing contractor both had full schedules. The parts of the market that have largely dried up is the excessive upgrades that aren't going to pay off in a market where prices are dropping. Granite is out, stainless is out, travertine is out unless you are talking about a seriously high end property. A $30k kitchen remodel for my house would be stupid in this market, but a $15k remodel will make a huge difference and be a key element in getting it sold.
What BEA table/line are those numbers from?
A big, final payment to a contractor today is a lagging indicator of work done a month or year ago.
What are the numbers for home-improvement "starts"?
Would be great if you could augment this post with a chart showing trends in home improvement expenditure against home building or prices - against a measure that has experienced a significant downturn in the past few years.
Such a graph would give your statement that "This suggests there could be more downside for home improvement, especially with homeowners less able to borrow against their homes." significantly more weight.
Plus, I'd be genuinely curious to see the results!
Keep up the great work,
D
The only thing that is selling in this market currently are "ready to move in" properties that need no maintenance or improvement. They don't have to have granite counter tops, but they have to modernized, clean and well maintained.
Sorry--comment got truncated.
The above quotation represents exactly what we are seeing in Massachusetts. Which explains why sales are so low. Most of our housing stock is junk.
Hi, thank you for your good analysis.
I have troubles in re-calculation your value for "Improvements as % of GDP". My chained2000 number for Improvements is 127495Mn and for GDP 11700.6 Bn. So I get 1.09% for Q2 2008 while your chart show smth closer to 1.25%. Btw, I have no problem in reaching your sing.family % of GDP level, though. Can you confirm your number for 2008?
Thank you,
Alex.