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The Remodeling MarketInternational Builders Show February 10 2012February 10, 2012

• Paul Emrath

• VP-Survey and Housing Policy Research

Outline

• NAHB Remodeling Market Index (RMI)

• NAHB remodeling forecast

• New NAHB estimates of remodeling by county

• Local economic impact of remodeling

• Volume of remodeling by size of project

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NAHB Remodeling Market Index (RMI)

• Quarterly survey of professional remodelers

• Have conditions gotten better or worse since last gquarter?

• Overall RMI + two major sub-indices:

– Current conditions

– Indicators of future activity

Remodeling Market Index (RMI): OverallSeasonally Adjusted

50

60

better/worse line

10

20

30

40

Inde

x

0

10

1st Qtr. 2001

1st Qtr. 2002

1st Qtr. 2003

1st Qtr. 2004

1st Qtr. 2005

1st Qtr. 2006

1st Qtr. 2007

1st Qtr. 2008

1st Qtr. 2009

1st Qtr. 2010

1st Qtr. 2011

Source: NAHB Economics and Housing Policy Group: Remodeling Market Index Survey

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RMI: Current Market Conditions Seasonally Adjusted

50

60

better/worse line

10

20

30

40

Inde

x

0

10

1st Qtr. 2001

1st Qtr. 2002

1st Qtr. 2003

1st Qtr. 2004

1st Qtr. 2005

1st Qtr. 2006

1st Qtr. 2007

1st Qtr. 2008

1st Qtr. 2009

1st Qtr. 2010

1st Qtr. 2011

Source: NAHB Economics and Housing Policy Group: Remodeling Market Index Survey

RMI: Future Indicators Seasonally Adjusted

50

60

better/worse line

10

20

30

40

Inde

x

0

10

1st Qtr. 2001

1st Qtr. 2002

1st Qtr. 2003

1st Qtr. 2004

1st Qtr. 2005

1st Qtr. 2006

1st Qtr. 2007

1st Qtr. 2008

1st Qtr. 2009

1st Qtr. 2010

1st Qtr. 2011

Source: NAHB Economics and Housing Policy Group: Remodeling Market Index Survey

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NAHB Remodeling Market Index (Seasonally Adjusted)

2010 2011Q4 Q1 Q2 Q3 Q4

OVERALL RMI 41.5 46.5 43.9 41.7 46.6

CURRENT MARKET CONDITIONS 43.3 46.1 44.8 43.0 48.4Major Additions And Alterations ($25,000+) 48.6 50.3 46.2 45.2 52.3Minor Additions And Alterations (< $25,000) 43.9 48.0 48.5 45.7 50.1Maintenance and Repair 37.0 39.5 38.4 37.1 42.3

INDICATORS OF FUTURE ACTIVITY 39.7 46.8 43.0 40.4 44.8Calls for Bids 47.2 53.1 49.8 45.4 50.7Amount of Work Committed for next 3 months 25.9 32.1 32.3 29.9 31.5

Backlog of Remodeling Jobs 42.6 49.7 45.7 43.0 46.8Appointments for Proposals 43.1 52.4 44.2 43.3 50.1

Source: NAHB Economics and Housing Policy Group: Remodeling Market Index Survey.

NAHB Forecasts

• GDP (Gross Domestic Product)– consumption, investment, govt, net exports – about $14.5 trillion$

• RFI (Residential Fixed Investment)– includes new construction and remodeling– normally about 5% of GDP (now, about 2.5%)

• Improvements to Owner-Occupied Housing– only remodeling input into RFI estimate– nearly equal to $ of new res. constructionnearly equal to $ of new res. construction– excludes maintenance and repairs– excludes improvements to rental properties

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Real GDP Growth

10%

15%

20% Q/Q Percent Change, SAAR

-5%

0%

5%

-15%

-10%

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Source: Bureau of Economic Analysis, NAHB Economic and Housing Forecast.

700

800

900Billions 2005 $, SAAR

Residential Fixed Investment

200

300

400

500

600

0

100

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Source: Bureau of Economic Analysis, NAHB Economic and Housing Forecast.

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Residential Remodeling:Owner-Occupied Improvements

140

160 Billions 2005 $, SAAR

60

80

100

120

2012 =113 078 +8 9%

-

20

40

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13Source: U.S. Census Bureau, NAHB Economic and Housing Forecast.

2012 113,078 +8.9%2013 =125,958 +11.4%

• “Zone”-level data (areas w population~100K) from the American Housing Survey

& C f

Estimates of Remodeling by County:Statistical Model to Estimate Local Spending by Home Owners

– By HUD & the Census Bureau, available for select metros

• Remodeling spending sensitive to

– Number of home owners– Average value of the homes – Share built before1980– Married couple share

• Results can be applied to areas where data are available

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Estimates of Remodeling by County: Applying Results from the Model to Individual Counties

• Data available for each county from American Community Survey (ACS U S Census Bureau)Survey (ACS, U.S. Census Bureau)

• Need 5-years of ACS data—typical year spending

• First NAHB county estimates last year using 2005-2009 ACS data

• Updated using 2006-2010 data released just before Xmas 2011

Homeowners’ Spending on Remodeling in a Typical Year:County Estimates

# Owner-Occupied

Married Couple

Average Value of

Share Built

Typical-Year Remodeling

CountyOccupied Homes

Couple Share

Value of Homes Before

1980

County Total

($Million)Per Home

Average for All Counties 24,209 61.9% 168,052 59.3% 66 1,907 Median for All Counties 7,283 62.5% 139,963 59.2% 13 1,677 Autauga County, Alabama 15,285 62.7% 157,939 34.9% 26 1,683 Baldwin County, Alabama 53,309 65.6% 234,197 28.3% 118 2,207 Barbour County, Alabama 6,665 57.8% 129,414 47.7% 11 1,629 Bibb County, Alabama 6,170 61.0% 111,790 51.7% 9 1,430 Blount County, Alabama 16,897 64.6% 136,906 38.6% 25 1,486 Bullock County, Alabama 2,871 41.0% 135,791 57.6% 6 2,123 Butler County, Alabama 5,530 51.8% 100,811 55.2% 9 1,572 Calhoun County, Alabama 32,818 58.4% 125,958 53.7% 53 1,617 Chambers County, Alabama 9,764 55.9% 102,334 62.0% 15 1,522 Cherokee County, Alabama 8,802 68.7% 133,240 45.2% 12 1,393

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Homeowners’ Spending on Remodeling in a Typical Year:Counties with Highest Estimated Total Spending

# O M i d A Share Typical-Year R d li# Owner-

Occupied Homes

Married Couple Share

Average Value of Homes

Share Built

Before 1980

Remodeling County Total

($Million)Per Home

1 Los Angeles County, California 1,552,091 59.7% 575,083 77.9% 8,363 5,388 2 Cook County, Illinois 1,169,991 55.2% 326,935 79.1% 4,055 3,466 3 Orange County, California 599,032 64.0% 639,702 64.3% 3,445 5,751 4 San Diego County, California 593,945 61.7% 543,286 55.9% 2,953 4,971 5 Maricopa County, Arizona 916,515 59.9% 305,165 34.4% 2,708 2,955 6 Santa Clara County, California 353,399 65.6% 736,029 70.9% 2,310 6,536 7 King County, Washington 468,539 60.6% 478,379 58.8% 2,099 4,480 g y g8 Nassau County, New York 363,366 68.5% 561,722 91.7% 1,868 5,142 9 Suffolk County, New York 403,093 67.0% 482,693 77.5% 1,797 4,458

10 Queens County, New York 352,110 56.7% 497,100 92.6% 1,723 4,894

Homeowners’ Spending on Remodeling in a Typical Year:Counties with Most Home Owners

# O M i d A Share Typical-Year R d li# Owner-

Occupied Homes

Married Couple Share

Average Value of Homes

Share Built

Before 1980

Remodeling County Total

($Million)Per Home

1 Los Angeles County, California 1,552,091 59.7% 575,083 77.9% 8,363 5,388 2 Cook County, Illinois 1,169,991 55.2% 326,935 79.1% 4,055 3,466 3 Maricopa County, Arizona 916,515 59.9% 305,165 34.4% 2,708 2,955 4 Harris County, Texas 793,400 62.5% 182,516 48.8% 1,555 1,960 5 Orange County, California 599,032 64.0% 639,702 64.3% 3,445 5,751 6 San Diego County, California 593,945 61.7% 543,286 55.9% 2,953 4,971 7 Miami-Dade County, Florida 480,532 55.1% 338,102 59.0% 1,663 3,460 y8 King County, Washington 468,539 60.6% 478,379 58.8% 2,099 4,480 9 Riverside County, California 467,086 63.7% 362,799 31.8% 1,553 3,325

10 Wayne County, Michigan 464,603 50.1% 151,103 84.4% 1,008 2,171

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Homeowners’ Spending on Remodeling in a Typical Year:Counties with Highest Estimated Spending Per Home

# O M i d A Share Typical-Year R d li# Owner-

Occupied Homes

Married Couple Share

Average Value of Homes

Share Built

Before 1980

Remodeling County Total

($Million)Per Home

1 Nantucket County, Massachusetts 2,657 58.1% 979,540 33.5% 23 8,520 2 New York County, New York 167,031 42.2% 830,881 86.5% 1,326 7,939 3 Marin County, California 65,720 59.4% 866,482 77.2% 511 7,782 4 San Francisco County, California 126,028 50.3% 811,538 84.9% 956 7,582 5 San Mateo County, California 156,149 63.1% 807,389 82.0% 1,130 7,235 6 Teton County, Wyoming 4,542 64.0% 777,138 39.7% 31 6,754 7 Pitkin County, Colorado 4,635 55.7% 733,599 46.8% 31 6,626 y8 Dukes County, Massachusetts 4,485 57.8% 737,681 47.1% 30 6,613 9 Santa Clara County, California 353,399 65.6% 736,029 70.9% 2,310 6,536

10 Santa Cruz County, California 55,878 60.3% 669,461 69.4% 341 6,106

Homeowners’ Spending on Remodeling in a Typical Year:Counties with Highest Value Homes

# O M i d A Share Typical-Year R d li# Owner-

Occupied Homes

Married Couple Share

Average Value of Homes

Share Built

Before 1980

Remodeling County Total

($Million)Per Home

1 Nantucket County, Massachusetts 2,657 58.1% 979,540 33.5% 23 8,520 2 Marin County, California 65,720 59.4% 866,482 77.2% 511 7,782 3 New York County, New York 167,031 42.2% 830,881 86.5% 1,326 7,939 4 San Francisco County, California 126,028 50.3% 811,538 84.9% 956 7,582 5 San Mateo County, California 156,149 63.1% 807,389 82.0% 1,130 7,235 6 Teton County, Wyoming 4,542 64.0% 777,138 39.7% 31 6,754 7 Dukes County, Massachusetts 4,485 57.8% 737,681 47.1% 30 6,613 y8 Santa Clara County, California 353,399 65.6% 736,029 70.9% 2,310 6,536 9 Pitkin County, Colorado 4,635 55.7% 733,599 46.8% 31 6,626

10 Santa Cruz County, California 55,878 60.3% 669,461 69.4% 341 6,106

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New Estimates of Remodeling Spending by County

Available online to all members of NAHB Remodelers

For more information contact

Therese CrahanExecutive Director, NAHB Remodelors

1-800-368-5242 x8211TCrahan@nahb.org

Local Economic Impact of Remodeling

• Local Income, jobs, taxes generated per $10M spending on remodeling

• Results for a typical metro area available online

• Can be used to publicize benefits of remodeling business to the community

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The Local Impact of Home Building in a Typical Metro Area: Income, Jobs, and Taxes Generated

Executive SummaryThe estimated one-year local impacts of $10 million spentThe estimated one-year local impacts of $10 million spent on remodeling in a typical metro area include

• $6.9 million in local income,• $577,000 in taxes and other revenue for local

governments, and• 78 local jobs.

Report shows more detail, including jobs in each industry and local taxes by type

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NAHB Remodeling Market Index (RMI)

Most quarters survey includes a set of “special”Most quarters, survey includes a set of special questions—in 2011 Q2, on volume of remodeling by size of project

Share of Business (in $ volume) by Size of Project—NAHB Remodelers

18%

21%

10%9%

12%

15% 15%

Source: Remodelers Market Index Special Questions, 2nd Qtr. 2011, NAHB Economics and Housing Policy Group.

Under $2.5K $2.5K to $5K $5K to $10K $10K to $25K $25K to $50K $50K to $100K $100K +

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Share of Business by Size of Project—NAHB Remodelers vs. Total Market

19%

24%

21%Total MarketNAHB Remodelers

15% 14%

19%

13%

9%7%

10%9%

12%

15%

18%

15%

Source: Remodelers Market Index Special Questions, 2nd Qtr. 2011, NAHB Economics and Housing Policy Group;Tabulations of data from the 2009 American Housing Survey, U.S. Census Bureau and HUD.

Under $2.5K $2.5K to $5K $5K to $10K $10K to $25K $25K to $50K $50K to $100K $100K +

Characteristics of NAHB Remodelers:Volume of Business Activity in 2010

49%Under $500,000

1%

22%

26%

$5 million to $9,999,999

$1 million to $4,999,999

$500,000 to $999,999

Source: NAHB 2010 Builder Member Census

1%$10 million or over*

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Characteristics of NAHB Remodelers:

• 95 percent have employees on the payroll

– Average: 3.6 construction employees, g p y ,2.1 non-construction

• Over 60 percent also build some new homes

– Average: 2 single-family starts in 2010

Source: NAHB 2010 Builder Member Census

If NAHB Remodelers capture most business

Question:

If NAHB Remodelers capture most business in the $100,000+ range, how much business in other job size categories are they missing?

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Total Remodeling in the U.S. by Size of Project—in $Billion

$5.8 B $21.5 BUnder $2.5K

$5.2 B

$7.0 B

$8.7 B

$10.5 B

$21.4 B

$27.8 B

$35.2 B

$12.9 B

$2.5K to $5K

$5K to $10K

$10K to $25K

$25K to $50K

$ 0 $100 C t d b NAHB

Source: Remodelers Market Index Special Questions, 2nd Qtr. 2011, NAHB Economics and Housing Policy Group;Tabulations of data from the 2009 American Housing Survey, U.S. Census Bureau and HUD.

$8.7 B

$12.2 B

$8.2 B

$0.7 B

$50K to $100K

$100K +

Captured by NAHB Remodeler-type BusinessesOther

This presentation is available as a handout on the internet at www.buildersshow.com/education

Contact Paul Emrath

VP-Survey and Housing Policy ResearchNAHB Economics and Housing Policy Group

1-800-368-5242 x8449pemrath@nahb.org

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Thank You