Despite believing a seller’s market is not coming soon, a majority of US homeowners plan to invest money in home improvement projects this year, according to the April 2010 American Express Spending & Saving Tracker.
Housing Market Has Little Impact on Home Improvement
A 53% majority of US homeowners believe a seller’s market is two or more years away, yet investing in their current home remains a priority. In fact, 62% of homeowners plan to embark on home improvement projects in 2010 and spend an average of $6,200 on enhancements.
Owners Value Homes more than Renters
Eighty-five percent of homeowners consider their homes to be their most valuable asset and as would be expected, are more than twice as likely as renters to invest in home improvement projects this year (62% compared to 24%, respectively). Young professional (86%) and affluent (72%) homeowners will embark on these projects more so than the general population of homeowners this year. On average, across the three homeowner classifications of general population, young professionals, and affluent the amount spent on property enhancements will be:
- $6,200 among the general population.
- $6,100 among young professionals.
- $11,500 among affluents.
Consumers Pay with Money on Hand
Nearly seven in ten homeowners (68%) will pay for improvements with cash, check or savings, followed by using a charge card or credit card with the intent of paying the balance off in full (28%), and using a tax refund (10%). Consumers are largely financing home improvements projects with money they have rather than various forms of loans, such as home equity lines (9%) or revolving balances on credit cards (7%).
Young Professionals Ready to Make a Housing Deal
Despite widespread consumer pessimism about the near-term housing market, more than half (55%) of young professional homeowners are confident they would get the asking price for their house at this point in time. Yet they (31%) remain more flexible than the general population of homeowners (21%) in willingness to sell their house for less than the asking price.
In comparison to the general population of homeowners, young professional homeowners are also more willing to negotiate to close a real estate deal. Eighty-seven percent of young professional homeowners are willing to make concessions to sell their homes, compared with 60% of the general population and 70% of affluent homeowners. Aside from lowering their asking price, young professional homeowners show more flexibility than the general population of homeowners in the top three concessions listed:
Consumers Seek Professional Help
While some (14%) homeowners are jumping on the do-it-yourself trend and plan to tackle projects themselves, a greater number (47%) plan to hire professionals to get the job done. More than half (54%) of affluents and two-thirds (36%) of young professionals will spend to use a contractor for at least some of the work. Thirty-eight percent of homeowners intend to enlist the help of family and friends.
Home Improvement Market Looks Up
The U.S. home improvement market has not totally shaken off the weakness that plagued it during 2008 and the first three quarters of fiscal 2009. However, as reported by Retailer Daily, strong fourth quarter net earnings performance by leading chains The Home Depot, Inc. and Lowe’s Companies, Inc. suggest it is preparing for a rebound this year.
During Q4 2009, Home Depot’s consolidated net earnings were $342 million, compared to a $54 million net loss in Q4 2008. In the same period, Lowe’s reported net earnings of $205 million, a 25.6% increase from $162 million in Q4 2009.
Home Depot and Lowe’s have both been predicting improved performance in 2010 despite disappointing performance earlier in fiscal 2009, and continue to do so following improved results in Q4.
During fiscal 2010, Home Depot anticipates 2.5% growth in both consolidated net sales and comparable store sales, as well as a net of six new store openings and “modest” gross margin expansion.
Meanwhile, Lowe’s executives have said that store expansion into underserved markets, exploration of international opportunities, and cross-functional efficiency initiatives should result in market share gains, improved customer service and sales growth. Lowe’s also expects consumers to resort to more do-it-yourself home repair projects in light of the difficult economy.
About the Survey: The American Express Spending & Saving Tracker research was completed online among a random sample of consumers aged 18 and older. The research sample of 2,003 adults surveyed the general U.S. population, as well as two sub-groups – the affluent and young professionals. Interviewing was conducted by Echo Research between March 30 and April 2, 2010.