MarketWatch recently did a piece on the activity within the home remodeling industry. There has been some significant growth in this area as many homeowners turn to renovation projects instead of selling their homes. Whether they are adding new value to homes or just making repairs, the home remodeling industry has hit on all-time high. MarketWatch suggests that this isn't likely to change any time soon. Homeowners will probably plan to spend more per project this year after having delayed improvements in the past. This is especially good for two of the biggest home improvement retailers, Home Depot Inc. And Lowe's Cos.
Analysts suggest that two-fifths of homeowners will spend more on their homes than last year, compared with 33 percent of homeowners who plan to spend about the same as last year and 27 percent who would spend less. This comes from an online survey by Piper Jaffray analyst Peter Keith, who presented the questions to 440 homeowners regarding home remodeling goals for this year.
In addition, almost half of the respondents said that they planned to complete a discretionary project of greater than $500 this year. About three quarters of them also said that they will be using cash savings to pay for larger ticket projects.
Keith suggested that the home improvement growth will go beyond GDP growth for an unforeseeable amount of time in the future. This allowed the analyst to upgrade ratings for Home Depot and Lowe's on Monday, which sent the stocks of both companies up one percent to $51.58 and $32.01, as the rest of the retail sector was actually in decline. The analyst suggests that the market will only get better for Home Depot and Lowe's, sending stock prices up to $62 and $41 respectively.
However, there are mixed signals coming from the housing industry. The Commerce Department stated on Monday that building materials and gardening equipment was more in demand by 3 percent from February, and that this was the biggest increase in a year and a half. However, the National Association of Home Builders and Wells Fargo housing market survey showed that home builder sentiment dropped in April for the first time as well.
Many homeowners responded that they have simply been delaying repairs due to seasonal changes and tax rebates. They wanted to wait until the right time to make purchases for their homes, and now that they are able to start projects, they will be increasing their spending and commence building. Keith still projects that homeowners will spend more on bigger projects in 2012 and that this will positively impact the home remodeling markets and stores that are specifically in the home improvement retail sector.