Remodeling ventures go the way of market

CHICAGO -- As housing slows, so slows remodeling.

That’s according to information from the recent convention of the National Assn. of Home Builders in Orlando, Fla.

That seems to run counter to the school of thought that holds that homeowners who can’t sell (or are afraid to try) will stay put and fix up the old homestead instead of moving up, thus fueling the business of contractors. Some have told me those very homeowners are keeping them busy.

But that apparently isn’t the norm.

“The best indicator for remodeling in the near term is sales of existing homes,” said Kermit Baker, who heads a Harvard University think tank that studies the housing industry.

Remodeling, as a whole, soared when home sales soared -- about 5% annually, according to Gopal Ahluwalia, a researcher for the home builders association. According to that group, Americans’ remodeling expenditures peaked at about $228 billion in 2006, just trailing the peak of the sales boom in fall 2005.

That fits the pattern perfectly. “People do remodeling in the first nine months after they purchase a home,” said Alan Hanbury, a Connecticut remodeler and member of the home builders’ panel.

So it’s hard to sell remodeling services to home buyers when there are far fewer of them. The association’s projections show remodeling expenditures holding steady, rather than sinking, for several years, before starting to rise again. But Baker, who heads the Remodeling Futures Program at Harvard, was less neutral in his outlook. Though he doesn’t see the business grinding to a halt, this year should see remodeling expenditures decline by 2.6%, he said.

A major culprit, Baker said, is the credit crunch.