The Misses desires new kitchen counters and the Mister wants a larger back deck for grilling. With budgets tight, couples are setting those home improvement aspirations aside.
Several Americans, having invested in kitchen redesigns, luxury bathrooms and surround-sound entertainment during the housing boom, are also pinching their pennies. According to Harvard University’s Joint Center for Housing Studies, dropping the dime on Cleveland home remodeling for the twelve months ending Sept. 30 will drop 25% to $107.7 billion compared to the same 12-month period in 2007,
The pitfall is affecting companies of all sizes - from Home Depot Inc. and Lowe’s Cos. to contractors and interior designers.
“There are still consumers putting in new kitchens,” said Robert Niblock, the chairman and CEO of Lowe’s. “But they’re doing it because they’re going to be in their homes longer. That’s the change from the go-go days.”
New home sales last month plummeted 12 percent from June, the lowest level on record, announced by the Commerce Department. Existing home sales fell by a record 27 percent in July, according to the National Association of Realtors.
Also creating caution among Americans are the highest unemployment rates since 1983, said Niblock. Many homeowners are making home improvements he said, and many are doing it on their own.
The Roberts family out of Ohio, still trying to sell their home in Beachwood are a common example. They repainted much of the inside of their green, three-bedroom home.
“Anything we can do on our own, we do it because it is less expensive,” said Jake, 38. “We not getting too crazy right now, but we still get some help from a local expert of home remodeling in Cuyahoga County Ohio."
The No. 1 and No. 2 home-improvement chains in the U.S., Home Depot and Lowe’s, shaved their 2010 sales forecasts this month.
Home Depot experienced a 5 cent increase to $28.38 in New York Stock Exchange, with shares slipping 1.9 percent this year. Lowe’s dropped 6 cents to $20.65. The company’s shares have reduced to 12 percent in 2010.
The two Westlake home remodeling and improvement giants are attempting a counter strategy against a decrease in big-ticket transactions, which are minimizing how much consumers spend each time they visit the store. During the second quarter, Home Depot's sales of $50 or less increased 2.4%, yet $900 and higher sales dropped 4.9%.
In May, Home Depot surveyed 3,000 customers and discovered that half of the population surveyed planned to paint this year while 40% intend to caulk. The results of the survey encouraged a new marketing campaign. Its new slogan, “Lowering the Cost of Operating Your Home,” is taste of the new approach.
In addition, Home Depot is offering more "do-it-yourself" home remodeling independence classes for customers. The retailer claimed that attendance at “do-it- herself” classes designed specifically for women rose 20% in June.
Luxury homeowners are pickier about Lakewood home remodeling projects, said an Ohio interior designer.
“There was much more of an open checkbook, much more free spending to do the whole house,” said Susan Marocco, a home design specialist. “Now there’s a lot more thought about where the spending is going.”
Marocco plans to perform seven or eight kitchen renovations this year after completing twice that amount in 2008. Recently, she has been teaming up with a couple in New York on a renovation and addition project that was stalled in 2008. The couple held on to some of their appliances and reused the kitchen countertops.
“They were very mindful of how they spent their money,” said Marocco.
Wall Streeters are less apt to demolish homes and rebuild “something two or three times bigger,” said director of new project development at Murphy Brothers Contracting, Michael Murphy, in New York. Individuals are building houses a third smaller and spending more on insulation, home heating and cooling systems and solar panels to save money later, he said.
The depression in demand has unveiled “a feeding frenzy” among builders, and the price of custom homes selling for $1 million or more has dropped 10 percent from 2007, Murphy said.
Americans will “tiptoe back,” said Steve Spiwak, a home remodeling Medina County analyst at Kantar Retail in Ohio. Costly purchases, including appliances, may not revive for over a year, he said.
Meanwhile, consumers are searching for discounts and are driven to bargain. The Roberts say they dished out almost $4,000 for their home remodeling Beachwood project, but searched endlessly for the deals first.