Self-Taught MBA: Facts, Figures, and Trends for 2017
Some surprising facts, figures and trends defy the experts and conventional wisdom. For one, trends have not changed all that much, and Millennials are not as mysterious as advertised.
Despite the price increase in homes, first time homebuyers still represented a robust 36% of the homebuying market in 2016, a little more than the “affordability” crises would suggest. The remaining 44% of homebuyers did sell a home before purchasing the next one, but it only took on average 90 days to accomplish the whole transaction. These two facts show a healthy housing market.
The number one reason folks buy a new home today: is affordability—nowadays it’s cheaper to own with a mortgage than to rent. The second reason, it’s aspirational, moving to a better neighborhood.
The best selling homes in 2017 remain the traditional, three-bedroom, two-bath home of about 2,000 sf. But a sizeable minority of about 10% of buyers, bought tiny homes, defined as homes under 500 sf. Nonetheless, the big homes, or MacMansions well over 3,000 sf, remain the bigger niche market, at about 13%.
Millennials buy big homes, too, despite what the experts will tell us. Some buy tiny homes, but it’s a very small percentage. Older folks, over 50, buy the smaller homes, of 2,000 sf and less, but not many buy the tiny homes.
Those homebuyers that prefer older homes, by and large refer to the “character” of the older homes, and the “character” of the neighborhood. They are very different type of buyer than the new home buyer. The older home buyer values authenticity. A consideration to take into account when specifying finishes in an older neighborhood, people like their wood floors and clapboard siding, over plastic laminates and vinyl. New home homebuyers prefer, well, “new”.
The good news, 77% of the homeowners plan to make home improvements this year. And fully eight in ten recent homebuyers improve the home purchased within 90 days, regardless of whether they bought a new one, or existing. Very few can buy exactly what they wanted, and hence the need to make modifications.
Of those homeowners doing home improvements, 50% will use a contractor—so call them back! About a quarter of all home improvement projects will go over budget by $5,000 or more, the number one reason homeowners complain about the contractor hired.
Be nice to your elders, boomers spend the most on home improvement. Gen-X come next, and Millennials dead last. Surprisingly, these spending habits have no correlation to income.
Most buyers found getting a mortgage much more difficult than they expected.
Some contractors are willing to install products bought by homeowners, and while this makes up only 20% of our industry, it’s a growing segment as homeowners prefer to select their products and make the purchase from a home improvement store or online. Nearly half of large remodeling firms install products through a home improvement chain, providing a significant cash flow.
Watch your subs, as more of them have been branching out to take on more trades, such as a plumber that will now remodel an entire bathroom.
Contractor purchasing patterns indicate outdoor living trends have continued to improve, while all other product lines have dipped. This implies there’s more growth in the market for patio and yard improvements than interior remodeling.
By an overwhelming margin, most of us general contractors shop at Home Depot. Subs, on the other hand, shop at trade suppliers, although the trend is slowly changing. Subs by more products from home improvement centers this year than they did in 2015. Despite a steady trend toward big box material suppliers, contractors report greater satisfaction with the lumber yard and specially wholesalers, due to customer service. Yet the graphs of business growth, with increased sales at the big box home improvement centers and declining sales at the local lumberyard, show that convenience trumps good service.
Today, 49% of general contractors report improved sales in contrast with 12% that report a decline. Subs are doing even better, with 61% reporting improved sales and profits, and only 9% complaining of a decrease.
What’s the best marketing? Word of mouth, say 83% of general contractors (and 64% of homeowners). Subs rely more on traditional advertising, such as yellow pages and truck signs, to reach consumers. Contractors say financing for projects is not important to secure business.
Surprisingly, six in ten contractors buy product online, meaning they plan far enough ahead to take advantage of the variety and pricing advantages the internet offers. Very few contractors use the internet for marketing, ignoring the fact that most consumers prefer to do their initial shopping and research online.
Contractors have embraced accessibility and ageing in place as standard business practice, even more than green building.
In year’s past, the design-build firm came into vogue as a vertical business model, but this has changed, fewer contractors offer design services as consumers have moved toward architectural services. Design matters nowadays, and a strong association with a top architectural firm in your locality may pay off.
Data credit, with thanks: Home Improvement Research Institute