The US home renovation market is expected to not only recover to pre-recession levels in 2015, but also to achieve an all-time high record level of over $300 billion. It is an exciting time for us at Kukun to be operating in this space. We offer a suite of services to assist homeowners with remodeling their homes and, since our beta launch earlier this year, we have gathered insights on emerging trends from our user base that will be useful for various industry stakeholders to understand current homeowners’ needs before they get realized rather than after. What are the most popular renovation projects that homeowners undertake? How much do homeowners spend on renovation projects, and what type of projects drive the remodeling market? What are the regional insights?
Trends in renovation projects
- Types of projects
According to the 2015 report by the Joint Center for Housing Studies at Harvard University, kitchen and bath remodeling constituted almost one-third (approximately 32 percent) of total discretionary and replacement homeowner-reported projects in 2013. This trend seems to have continued, with kitchen and bath remodeling constituting ~37 percent of project estimations on the Kukun tool for the time period from February 2015 to June 2015.
It is important to note that remodeling for kitchens and full bathrooms have higher average costs per project than the total average cost per renovation project, signifying continued healthy growth in the renovation industry.
- Cost of renovation projects
On the Kukun estimation tool, the average estimated cost per remodeling and per addition project was $13,442 and $33,703 respectively.
The JCHS study found that the average reported cost per project (including both remodeling and addition projects) was lower, at $8,833 in 2013. However, this includes DIY projects and a large proportion of smaller repair and maintenance projects, which bring the average cost down.
A notable trend observed in the JCHS study is that high-cost projects form a small amount of total projects undertaken, but drive a large portion of the total spend. For instance, the share of homeowners nationwide in 2013 who spent $35,000 or more per project was only 5 percent, but their contribution to total expenditure of renovation projects was almost 40 percent.
Similarly, of the projects estimated on the Kukun tool, the share of projects that cost $35,00 or more was 12 percent, but their contribution to total expenditure was more than 44 percent.
This trend can also be observed when we group the different remodeling projects by finish level (where “Best” is considered the highest quality and most expensive, “Better” of intermediate quality and cost, and “Good” as the lowest of the three). This trend is particularly interesting to renovation professionals targeting different market segments.
Regional trends in the renovation market
- Relationship between remodeling industry and overall housing industry
The S&P/Case-Shiller Home Price Indices are a measure of the state of the housing market in the US. Originally based on work done by economists Karl Case and Robert Shiller, these indices are now calculated and published by S&P on a monthly basis. One of the indices produced is a 20-city composite index, with a home price index for every city.
Interested in whether there are any strong links between the S&P Index and the remodeling industry, our team has run correlations between residential real estate housing prices and Kukun proprietary data from our estimation tool. Specifically, we ran correlations on the Index with respect to the following three categories by metro area: total number of projects, total estimated spending, and average estimated spending per user.
As anticipated, the three Kukun-based metrics were (weakly) positively correlated with the quarterly Home Price Index. Even with our user data generated in the last four months, we observed a smaller correlation between the Kukun-based metrics and the Year-to-date Home Price Index.
|Correlations across 20 metro areas|
|Quarterly Home Price Index||Year-to-date Home Price Index|
|Total # of projects
estimated on Kukun
|Total estimated cost of
projects on Kukun
|Average estimated cost
per project on Kukun
- Renovation projects by region
The Harvard remodeling study provided regional level data for 2013. Some notable conclusions include:
- Out of the four US regions (Northeast, West, Midwest, and South), the largest share of homeowners and total expenditure on home improvement was in the South (36 percent and 34 percent, respectively).
- However, the average expenditure per project in the South ($8,536) was lower than in the Northeast ($10,717) and the West ($9,179).
- While the Northeast has the smallest portion of homeowners nationally (19 percent), it is home to the highest average expenditure per project, driving its share of total expenditure up.
When comparing these trends with the data from Kukun, we noted different results at the regional level. There are many drivers for these differences, including, most notably: variations at the city/state level, which are potentially impacted by Kukun’ limited visibility in some of those areas; Kukun’s marketing efforts, which may target certain markets more than others; demographic differences among regions with highly populated metro areas (where people are more likely to use technology to tackle their home improvement efforts); and the type of projects undertaken (JCHS data includes home repairs and DIY projects).
The most notable regional trends are:
- Users estimating projects based in the West had the largest proportion of projects (44 percent) and account for almost half of all estimated project costs (49 percent).
- Users from the South, while coming in second amongst the regions for proportion of projects covered (22 percent), only account for 19 percent of all estimated project costs, indicating that the average cost per project in the South is lower than other regions. This is similar to the JCHS trend.
As Kukun continues to grow nationally, we expect our user base to grow more uniformly across regions. The wealth of data obtained will allow us to delve deeper and with more detail into regional renovation trends in the future.
- Renovation projects by metro area
The Harvard remodeling study also provided city level data for 2013. The Kukun team was interested in determining the correlations between the aggregated remodeling data per city from JCHS (total number of projects, total number of projects costing more than $50,000) and Kukun data (total number of projects, total estimated spending).
An initial scan across the 20 metro areas used in the S&P Index provided some interesting results. While there was no correlation between the total number of projects from the JCHS and Kukun data, there was a (weakly) positive correlation between the number of projects costing more than $50,000 and Kukun’s data.
|Correlations across 20 metro areas|
|Total number of projects costing
more than $50K (JCHS)
|Total # of projects estimated on Kukun||0.54|
|Total estimated cost of projects on Kukun||0.51|
Over time, as Kukun gathers more data at the metro level, we expect these correlations to be even stronger, especially once we include more cities.