The concept of “home for life” has become an increasingly prevalent trend for the home building industry. Homeowners have redefined their idea of a “dream home” and have made it clear they’re staying put… literally. In fact, 84% of the respondents in a Hanley Wood survey said they would like to remain in their current homes through retirement. Instead of moving to a larger home, homeowners are taking matters into their own hands by redefining the quality of an existing space. This presents a unique and profitable opportunity for remodeling companies to take advantage of; the key is to recognize exactly where.

Jeff Shea, owner of The Siding Doctor, has been involved with the home building industry for the past 30 years and has noticed the upgrades in which homeowners place value.

“Homeowners today are working their way through the house with small high-end upgrades like windows and doors, and installing other items to reduce energy use,” says Shea. “They are trying to avoid debt. The available resources for homeowners to upgrade are much more limited than they were ten years ago.”

This presents a challenge for remodelers looking to give business a boost. It is important for businesses to think of their consumer’s needs and where the home is most likely to expand. In the past decade alone, the U.S. census has reported an increase of multigenerational family homes by 30 percent. As a result, families are remodeling not only to upgrade, but to increase the overall comfort level within a home. Homeowners, therefore, redefine the value of their space in places like the basement and the outdoors.

To begin with, the most commonly thought-of area for remodeling would be the basement. Most homeowners in the past saw this area as a “work-in-progress” type of space. Now basements are being turned into budget-conscious “apartment style” living spaces as a way to adapt to their new multigenerational family demands.  With the economy still in recovery, homeowners are looking for efficient remodeling that doesn’t require undertaking a major project.

“There is a growing market of do-it-yourselfers in search of practical improvements that add real value,” said Jonathan Zublena, product manager at Sauder Woodworking. “Sauder anticipates that many home improvements will include upgrading existing ceiling systems as a means to improve the overall value perception of a room or a home.”

Another option for changing the perception of a home is to transform an outdoor space into an outdoor living room. Homeowners have discovered that their backyard is more than just an area for kids; it is an area for entertaining as well. As a result, remodelers are receiving more requests from homeowners for direction on creating outdoor kitchens, entertainment areas and fire pits. Admittedly, in terms of time and resources, outdoor kitchen construction is the most demanding aspect of the outside space; however, an outdoor kitchen traditionally garners the largest return on investment. Companies like Danver offer a one-stop shop of appliances and products equipped to handle the outdoor conditions from stainless steel cabinetry to pizza ovens, outdoor heaters, insect systems, cocktail stations and more.

Most – if not all – home renovations today occur to achieve one goal: to increase the quality of living in a house as homeowners readjust for long-term occupancy. Home and building product manufacturers and remodelers alike understand this critical pivot in home trends and have thus far adapted quite effortlessly.

As we look forward to another mutually successful year, I’d like to take this opportunity to thank you for being a valued reader of our blog, newsletter and social media feeds, and for contributing your opinions… keep them coming!  

For Kleber & Associates, 2012 will be a milestone, as we celebrate our 25th anniversary of building better brands that build a better home.

I’m beyond thrilled and blessed to have seen K&A grow as it has, and greatly look forward to new beginnings not only for the agency, but for our industry and economy as a whole.

The economy added another 200,000 jobs in December – the jobless rate declining to 8.5%, the lowest level in nearly three years. As we ended 2011, predictions for Q4 GDP were increased to 2.8%… I won’t be surprised if we approach 4%.

Consumer spending has exceeded expectations and manufacturing is increasing. Inventories are lean and savings are flush. The share of households delinquent on their mortgages has dropped to the lowest level since late 2008, residential construction is surging and homebuilder stocks continue to lead Wall Street. Previously owned homes for sale are now at the lowest level since mid 2005. The National Association of Realtors reported that the number of people signing contracts to buy homes rose in November to the highest level in a year and a half.

In many cities, owning a home now costs less than renting, while the architecture billings index moved into positive territory for the first time since August. And there’s serious talk of a mortgage re-set to help launder the toxic shadow inventory in the works. But be careful if you’re superstitious… it’s a leap year and we’ve got three Friday the 13ths in 2012!

As the economy still looks to recover from the recession and the housing market continues to be deflated, more and more families are looking to save money by living in non-traditional extended family units. In the past decade alone, the U.S. census has reported a rise in multigenerational families by upwards of 30%. Culturally, in the U.S., families have stuck to the typical nuclear family style residence of parents and children. However, times are changing and many family homes now not only consist of the nuclear unit, but grandparents, in-laws, and cousins as well. Baby boomers, now comprising  30% of the U.S. population, now move in with their children to save money. Boomerang children, or college graduates that move back home with their parents, are an increasing demographic of the U.S. population.

Families have opportunities to save money living under one roof in many ways. Firstly, more adults mean more income to support mortgage payments and other household related bills. Secondly, elder relatives act as a sort of “built-in-babysitter” for the family, saving cost on childcare. Thus, the extended family housing is unique in that it is a growing sector in an otherwise depressed market. Naturally, builders and contractors have flocked to this niche industry, offering unique features such as second master bedrooms or additional kitchens. While duplexes and granny flats have a long history in American architectural style, the “two-homes-in-one” model is novel and attracts new buyers as well as builders. Look to see more homes built in this style in the New Year.

While this adjusted home building style may be new, there is nothing new about extended family living. Multigenerational living isn’t just a fad to be forgotten in a few short years time. Americans may merely be adapting to what other cultures have been practicing for centuries. In many parts of Latin America, Africa, and India it is the norm to live with many other members of your family. The old adage, “it takes a village to raise a child”, wasn’t invented purely on thought alone. Essentially, that is what multigenerational living is, a small community unit. Broken down even further, the Hispanic and American sectors of the U.S. population see twice the number as whites living in multigenerational residences. This is powerful information for builders, contractors, and suppliers of building materials. The possibilities for growth in this niche market are endless!

December began with the stock market’s best performance in almost three years.

The unemployment rate fell to a 2 ½ year low, while the number of Americans who signed contracts to buy homes surged to the highest level in a year. Homebuilders are now as confident as they were in May 2010. What’s more, consumer confidence rose by the most since April 2003, on the heels of record breaking retail sales from Black Friday and Cyber Monday. And it wasn’t all flat screens and iPads either — as Home Depot shares are now at a 52 week high.

U.S. factory activity expanded to its highest level since June, while construction spending climbed to an annual rate of some $800 billion… led by housing and commercial starts.

The Census Department released its monthly New Residential Homes Report showing a +1.3% monthly increase and +8.87% increase year-over-year. The inventory of new homes has now fallen to the lowest level seen in the last 47 years.

The U.S. is on target to invest more than $337 billion on our homes, with annualized private residential fixed investment rising 3% for the quarter, based on the Bureau Economic Analysis. Significantly, this is only the second increase since 2006… and this time it’s not boosted by artificial government tax-credit stimulus.

While shadow foreclosure inventory and the European economic community both appear to be held in check (at least for now) by coordinated institutional effort, I remain quite optimistic for the new year. How about you?

Nov 2011

For the last five years, below-trend new home supply has likely more than compensated for the prior six-year bubble of overbuilding.  Why so confident, you may ask?  Quite simply, we’re witnessing higher unit orders and backlogs from the homebuilders.  Lennar reported an 11% third-quarter rise in new home orders.  Hovnanian’s net contracts jumped 33%…a growth rate matched by Beazer Homes in its own fourth-quarter.  What’s more, KB Homes backlog is now up to 22%.

The U.S. home-ownership rate rose in the third-quarter, as rising rental rates are now beginning to moderate recent competitive demand trends for apartments.  The National Association for Home Builders/Wells Fargo Housing Market Index rose four points to 18 in October… the highest one month gain in more than a year.

And demand appears to be stable as The National Association of Realtors reported that sales rose in every state in the third-quarter—year-over-year—with 45 states posting double-digit gains.

Compelling evidence I’d say… just in time for the critical 2012 planning season.

Click each image to view the full 3 month performance

In case you missed it, I had the pleasure of hosting a webinar last month with Leah Thayer of daily 5 Remodel on the small spaces trend for homes that has swept the nation.

The trend toward larger homes in the U.S. stopped abruptly in 2007, and the resulting trend toward small spaces will impact the housing market for years to come. In this webinar, I outline strategies for remodelers, designers and architects to inspire homeowners to “right-size” their existing homes in ways that emphasize quality over quantity, enhance their existing spaces and conserve energy and resources.

Also featured in the webinar are how several manufacturers have evolved their product lines to meet these emerging desires, how architects use “design tricks” to small spaces feel larger, and how remodelers can add function and appeal to every space inside — and outside — their clients’ homes.

You can take part by clicking the image below:

It seems the more you have, the more you need. What if Americans traded in all of their “somethings” for nearly nothing? The recent “extreme-downsizing” trend is becoming a tempting challenge for many, and as their piles of possessions shrink, so do their homes.

In “Forget Marta Stewart—Try Martha Hubbard,” Ellen M. Kozak claims she is on the verge of tossing nearly all of her possessions and moving to a small space because the idea of less junk to dust, less floor space to sweep and less to account for is appealing. So appealing, in fact, that some are even setting a limit on the number of things they own. The 100 Thing Challenge, a grassroots movement in which people eliminate all but 100 of their possessions, is a minimalist trend that is proving successful for people across the country who are “overwhelmed with stuff.”

One reason for the purging of our possessions is the technological advances we’ve seen in the past few years. Electronic readers have replaced the books on our bookshelves and iPods have diminished our CD collections. Smart phones have virtually everything we need: camera, calculator, computer, alarm clock, and so much more including, of course, a phone. These things that took up space before are now all housed in one or two central systems. We don’t need alarm clocks, calculators, CD players or books if there’s an option to consolidate all into one device. These objects could even be considered irrelevant, especially to those adopting the “100 Thing” mentality.

But even if you do have more than 100 possessions and haven’t packed up your car and headed to warmer weather where you can toss your bulky winter wear and never worry about that snow shovel, the idea of having fewer items in smaller spaces is a continuing and noticeable trend, especially in the housing industry. According to the National Association of Home Builders (NAHB), the average size of a new- single family home declined from 2,521 square feet in 2007 – the peak of the housing boom – to 2,377 square feet in 2010. After the economic downturn in 2009, it seems everyone learned to cut out what they don’t need. People are now making the most of the space they do have; they’re remodeling their homes instead of moving into new ones.

Whether it’s an extreme elimination of items or a simple downgrade, it looks like the “bigger is better” mentality is on its way out. Much like we’ve seen the change from big gas guzzling SUVs and trucks to fuel-efficient eco-friendly cars, the change from excess to absence in possessions – and subsequently living spaces – is right behind.

This morning on CNBC’s Squawk Box, former Federal Reserve Chairman Alan Greenspan said one of the main keys to getting the housing market back on track will be to reduce the number of foreclosed homes in the channel.

With approximately 4 million foreclosed or acutely delinquent homes in the US, we can only imagine what the situation would be if they all flooded the market simultaneously. It’s my opinion, however that the banks can only process some 900,000 properties a year. So what are we to do with this distressed inventory? Should we continue to sit on the sidelines and hope that things will improve? No! We need to continue to think creatively as a community about proactive ways we can bring ourselves out of this situation. I’ve come up with a few ways to get these homes off the market while benefiting communities. For example:

• FEMA could purchase the homes near disaster areas such as Tuscaloosa, Alabama and Joplin, Missouri to provide temporary housing for victims instead of bringing in FEMA trailers. Homeless residents could then have the option of buying these homes from the government once they are in a position to do so.

• Neighborhoods or city governments could buy homes and clear the land for community gardens or parks.

• Corporations could buy homes near their buildings to provide employee housing as part of a benefits or relocation package.

• Non-profit organizations or city governments could buy the homes for homeless shelters.

Let me know what you think of these suggestions and what other ideas you may have for putting distressed properties to good use!

In efforts to steer the US toward a more environmentally friendly and sustainable future, President Obama’s administration has implemented programs and initiatives to encourage both businesses and homeowners to embrace sustainable practices and technologies. Recently the federal government took another step toward encouraging homeowners to upgrade their homes by announcing the new PowerSaver program through the FHA. The program will allow homeowners to borrow up to $25,000 to make energy improvements. Fannie Mae’s new Energy Improvement feature for mortgage loans is very similar to the government’s program.  Both programs encourage homeowners to replace doors and windows, HVAC systems, water heaters, insulation and duct sealing for more energy efficient products and technologies like solar panels and geothermal systems.

Home builders are concerned that the new programs only encourage revamping existing homes and don’t encourage consumers to purchase new energy efficient homes. Fannie Mae has ended its Energy Efficient Mortgage that allowed home buyers to finance energy efficient homes, but the federal government still has its Energy Efficient Mortgage program intact. Home building company Meritage is concerned that appraisers and banks are not accurately recognizing the value of energy efficient features when reviewing mortgage applications, making it more difficult for consumers to purchase new energy efficient homes. While HUD representatives believe the value of energy efficiency in new construction is being recognized by local building codes and appraisers, Meritage believes the new PowerSaver program gives consumers even more reason to stay in their existing home rather than buy a new one.

From bank meltdowns and housing market slumps to bail outs and fears of inflation, it’s hard to ignore the effects the recent recession has had on our lives. During the height of the recession, unemployment peaked at 10.1% and consumer spending dropped significantly in all sectors. Nearly three years after it began, much has been written on the long term effects of the recession and what Americans have supposedly learned from it.

A significant finding in recent months concerns the effect the economic downturn has had on the wealthiest Americans and their purchases in the luxury category. Spending by wealthy Americans (those with annual household incomes above $200,000) has returned to pre-recession levels while spending by middle and low income Americans is still low. In the housing market, despite a 20% decrease in existing home sales between $100,000 and $500,000, sales of homes valued at more than $750,000 increased.

But the rich aren’t spending their money in the same way they used to. A study by the Harrison Group found that the shopping behaviors of the affluent have become more price conscious. Even though many of these people didn’t lose their home or job during the recession, they saw how others were affected around them and have changed their habits because of it. Affluent consumers now report using coupons, waiting for sales and buying less expensive brands more frequently than they did a year ago. Brands are having significantly less effect on luxury consumers. Forty-one percent of luxury consumers currently believe that the brands they wear say a lot about who they are as a person compared to 51% in 2008, and only 32% of luxury consumers are willing to spend more for the style and fashion of designer brands as compared to 51% a year ago.

Affluent consumers are also more distrusting of salespeople and advertisements that focus on the brand image and luxury status. These consumers instead desire one-of-a-kind items and experiences that create fond memories. They demand personal value from the products they purchase. Harrison Group vice chairman Jim Taylor says that “In the end, the increase in spending we foresee is not a return to the wanderlust of the past, but rather, an expression of sensible, resourceful, self-confident consumers expanding their portfolio of needs.”

It is also important that companies understand the changing face of the luxury consumer. In the new Ad Age Insights White Paper, “The New Wave of Affluence,” a Digitas study reports that a person’s financial standing before they are 35 is a significant indicator of what their financial standing will be later on in life. If a person reaches the $100,000-$200,000 income level before they turn 35 (labeled Emerging), they have a greater chance of crossing the $200,000 mark into the Affluent category later on in life. Because those currently in the Affluent category are spending more conscientiously now, it is the Emerging group that is most likely to see an increase in demand for luxury brands. These young professionals have secure jobs that will lead to affluence later in life and have fewer responsibilities such as mortgages and children, leading to ample disposable income to splurge on the luxury goods. And because individuals in the Emerging category are widely plugged into interactive and social media, they can be much easier for companies to reach than older, Affluent consumers.

In the post-recession environment, it is no longer acceptable to assume customers will buy luxury products solely for the brand they flaunt. As affluent consumers begin to reject their old habits of spending based on brand image, companies must be able to communicate and deliver real value to their consumers.