Posting for

Tuesday, April 10, 2001

by: Bert Rush

brush@firstam.com

REMODELING HOMES/HOME IMPROVEMENTS/EAGLE POLICY

The current boom in home remodeling continues to be studied and commented upon for its effect on the economy, jobs, and the lifestyles of millions of Americans.

In a new report released March 22nd, the Joint Center for Housing Studies of Harvard University reported that Americans are now spending almost as much for home remodeling each year as is spent on new home construction.

The report, titled "Remodeling Homes for Changing Households," is full of interesting facts and conjecture. Here are some highlights (with page cites for the morbidly curious):

"In each of the past 15 years, about one million homeowners spent more than $10,000 on a major kitchen or bathroom remodel, an addition, or other major alteration. This means that in any given year, about 1.5 percent of all owner-occupied units undergo significant modification--about the same share added to the stock each year by new construction." (Page 3)

"(B)etween 1985 and 1999, almost 15 percent of existing homes had one or more bedrooms added, over 24 percent had other rooms added, and 20 percent had baths added." (Page 4)

"The U.S. Department of Housing and Urban Development's American Housing Survey (AHS) ... reports that homeowners alone spent about $114 billion on improvements and repairs ($107.5 billion for single-family homes and $6.5 billion for condominiums and mobile homes) in 1995." (Page 4)

"Over the past 15 years, homeowner remodeling expenditures have grown about 1.8% annually (after adjusting for inflation)--more slowly than the 2.7% pace of the overall economy, but faster than the 0.5% growth rate of home building." (Page 6)

Older homes are more likely to be remodeled. According to a 1995 American Housing Survey, nearly half of owner-occupied homes are over 35 years old. (Page 6)

"...the do-it-yourself market was responsible for just over 40% of total annual purchases of products used in remodeling projects (for the years 1994-95)." (Page 18)

For the years 1994-95, it is estimated that do-it-yourselfers completed about 2.8 million bathroom remodeling projects (compared to 2.1 million projects by contractors), and 3.5 million room additions or alterations (compared to 3.3 million by contractors). (Page 19)

"After averaging a compound annual rate of about 1.8% over the past 15 years (after adjusting for inflation), growth of remodeling expenditures is projected to pick up slightly to about 2.0% per year between now and 2010." (Page 32)

With the aging of the baby boom generation, "(w)e expect that that average annual spending on contractor-installed improvements will increase more than half a percentage point faster than spending on (do-it-yourself) improvements." (Page 35)

"(R)emodeling expenditures are likely to outdistance the nation's investment in new residential construction within the next 15 years." (Page 39)

Whether done by a professional or a "do-it-yourselfer," we know from experience that many projects are undertaken without required permits, and may ultimately be found by local building inspectors to need corrective work, or demolition. Unfortunately, these problems frequently come to light after the do-it-yourselfer has sold the home and moved on, or the contractor has disappeared...

...which is where the EAGLE policy comes in....

With the magnitude of remodeling activity, many homeowners may see our coverage for builing permit violations, contained in the EAGLE policy, as their most vivid example of the value of title insurance.