Passing $200 billion for the first time, Americans spent an estimated $210 billion on residential remodeling in 2005, based on the National Association of Home Builders’ analysis of recently released third-quarter remodeling spending from the U.S. Census Bureau.
In addition, NAHB Remodelors Council forecasts the largest increase in spending in 2006 in more than 10 years to a record $238 billion, a 13.2 percent jump.
“The devastating 2005 hurricanes, combined with a rebound in the rental market, are expected to spur a historically high increase in spending this year as repair work proceeds in the Gulf states and apartment owners renovate properties to maximize rental income,” said Vince Butler, chair of NAHB’s Remodelors Council and a home remodeler from Clifton, Va. “The massive owner equity and low refinance rates that fueled recent growth will continue to drive strong expansion.”
The record industry growth forecast for 2006 is more than double the pace of growth in 2005, when remodeling spending grew by 5.8 percent, in line with average annual growth of 5.3 percent from 1994 to 2004. The previous growth record was posted in 2004, when spending jumped 12.2 percent due to a strong increase in the real estate market.
NAHB’s Economics Department recently analyzed the local economic impact of remodeling. For every $100,000 spent on additions and alterations, the local community receives $54,200 in income, $4,900 in taxes and other government revenue, and 1.01 full-time local jobs.
“The $200 billion remodeling industry is almost exclusively small businesses that operate in local communities,” said Butler. “And we can now confirm that money spent on remodeling stays local.”
Regionally, the South accounts for 31 percent of all remodeling expenditures, with an average of $1,513 spent per household in 2004, the last full year of Census data. The highest per-household spending occurs in the Northeast at $2,185, with a 23 percent share of all spending. The West spends $2,104 per household and accounts for 26 percent of all expenditures. The Midwest represents 20 percent of the remodeling market at $1,530 per household. The residential remodeling market accounts for approximately 40 percent of all home construction.