Kitchen & Bath Business - January 2017 - 37

Industry Outlook

ing home sales have averaged about five million
units in each of the past three years (2013-2015),
and we expect to exceed that volume in 2016.
Those households that have moved to their "new"
homes will engage in improvements and updates.
The second component is the trend toward
higher-priced homes. Over the past four years, the
percentage of new homes priced at $400K has risen
sharply.While a fifth of the new homes sold in 2013
(20 percent exactly) were in this high-price bracket
($400K plus),their share is up to 29 percent in 2016.
These households that purchase high-end
homes will spend more on remodeling projects
than the national average. The same Joint Center
research reveals that the 20 percent of households
with homes valued at $400K or more accounted for
nearly a third of the remodeling expenditures. In
other words, we expect remodeling activity to rise
in line with the volume of high-end homes sold.
Dietz: On the demand side, price gains have

boosted home equity for existing owners. They
now have more wealth and greater resources to
remodel. The limiting factor is the amount of existing homes; inventory is tight at less than a fivemonth supply. Why do we not see builders adding
more inventory? There are supply-side factors that
constrain how fast this market can grow, including
the shortage of labor, supplies and lending.
A tailwind that will help is that people are living
in their homes longer and not moving as much,
which means a greater demand for remodeling.

Contant: New-home construction is growing at
the strongest pace since 2007. As home prices are
accelerating and interest rates go up, new home
sales will soften. An advantage to remodeling is
that someone can buy an existing home, and they
can renovate it to meet their needs. Homeowners
can perform updates to portions of the home and
budget for the fixtures and materials they desire.
What regions in the U.S. are flourishing in our industry?
Dietz: For remodeling, there is growth throughout
the U.S. because housing stock is aging and needs
improvements. Energy-efficiency upgrades are
being seen in the Midwest and the Northeast,
and the primary drivers of this are home equity
and household wealth.
For single-family, builders have been talking
about markets in Idaho, Montana and Colorado
as pockets of strength. For multi-family, markets

like D.C. and Houston are seeing slowdowns in
apartment development.
Gutierrez: The Northeast and the West lead the

nation with the highest percentages of high-end
home sales. In the Northeast, particularly driven
by activity around the greater D.C. metro area,
we've seen that homes priced above $500,000
account for almost half of all new-home sales (48
percent).This growth in homes sold for more than
$500,000 is a significant increase from 2013, when
the same threshold bracket represented a little
above a quarter of homes sold (28 percent).
Home prices in the Midwest and South have
remained relatively stable, with a larger percentage of homes in the middle ranges of $300K to
$500K. The West is also an area where high-end
homes prevail, mainly in the northern part of California. The share of new homes sold at $500,000
or more has nearly doubled over the last four years.
While they accounted for just over one-tenth of
new houses sold in 2013 (13 percent), they have
reached nearly a quarter of sales during 2016.

Contant: The largest improvements market has

been the Mid- to South Atlantic - from Maryland down to Florida.The Northwest and Pacific
Coast remain strong. All of the mountain regions
are good, and Salt Lake City and Denver are also
hot. Surprisingly, the Rust Belt higher-populated
cities are attracting residents back and are doing
well. Pockets in the Midwest, such as St Louis,
also show growth.

RANDY FISER

CEO of the American
Society of Interior Designers
(ASID)

MANUEL GUTIERREZ

Consulting Economist for
the NKBA
and Principal of
ManuelDJGutierrez, LLC

Fiser: The major cities are seeing the most impact,

but we are also starting to see some smaller markets growing.Texas, Florida, California and New
York are all hot markets.

"These households that purchase high-end
homes will spend more on remodeling
projects than the national average."
Manuel Gutierrez
37
Kitchen & Bath Business - January 2017

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