Remodeling Up, While Construction is Down

This week's glum recessionary indicator was a Commerce Department report about construction spending hitting an eight-year low. But a deeper look as some more other numbers shows brighter news in the remodeling world. The New York Times this week reported anecdotal evidence of remodeling companies becoming booked six months in advance, a marked improvement from anytime in the past year.

In Marshall County, Tenn., more remodeling construction permits have been filed in the last six nine months than in the prior 12 months, even while new construction permit filings keep declining.

Meanwhile, a Harvard economist told the Kitchen Cabinet Manufacturers Association that the decline in remodeling spending is leveling off. Similarly, related reports show a slower drop in kitchen cabinet sales. In this economy, it's good news when things are getting less bad, even if the numbers are not yet in positive territory.

There are some good reasons for homeowners to jump on the renovation bandwagon:

• This month, most states are launching new so-called "Cash for Appliances" rebates for trading up to energy-efficient refrigerators and other appliances. Each state's program covers different products and has different rules. Click here to review the program in your state.
• Spring home and garden shows are bringing out the hot trends and new products to whet your appetite for upgrades. We recently covered one of the nation's hottest home design shows.
• Home Depot, the biggest of the big-box stores, is having a big sale. "Spring is our Christmas," a store executive told Greenhouse Management and Production Magazine this week.

The growth in remodeling contrasts with the picture for new construction. On April 1, the Commerce Department listed a 1.3 percent drop in construction spending in February. After three previous months of straight declines, it reached the lowest point since November 2002.

Industry insiders said the more positive employment reports were no cause for celebration.

An April 2 report from the Associated Builders and Contractors downplayed the U.S. Department of Labor's reported March increase of 162,000 construction jobs. The group chalked up the increase to a temporary and seasonal boost in construction activity after February storms slowed building projects.

Less building and more renovating may be good for the environment as it reduces the consumption of resources. The trend is also good for the remodeling industry and the battered home improvement retail sector. Home Depot is banking on those major spring sales to continue a gradual and inconsistent climb back up from a December 2008 low of about $21 per share. At above $32 on Feb. 2, the stock value remains barely half of its 2000 peak.

Posted by: Steve Graham