Remodeling Market Shifts Will Influence Window and Door Demand

John G. Swanson
February 5, 2009
COLUMN : Opening Remarks | Segments, Statistics, Markets & Trends

“Coming on the heels of unprecedented growth over the past decade,” the home improvement industry is in the midst of a “severe downturn,” says a new report from the Joint Center for Housing Studies at Harvard University. The study suggests that by the time a recovery begins, “the entire industry is expected to begin a marked transition on both the demand and supply side.”

The changes outlined offer some encouragement for the replacement segment of the window and door industry. It offers a more cautious outlook, however, for companies focused on providing products for more upscale alterations and additions.

On the demand side, the joint center states that over the past several decades, as house prices steadily increased, “Americans invested in discretionary home improvements as a wealth-building strategy.” As many watch the value of their homes decrease, “owners are more likely to make improvements primarily to maintain the structural integrity and efficient functioning of their homes, as well as to generate cost savings.”

According to the report, much of the record-breaking growth seen in the remodeling market up to its peak year in 2007 could be attributed to strong activity in the upper end of the market, kitchen and bath projects, and an increasing number of professional jobs. The top 1 percent of homeowner projects—the most upscale jobs—accounted for a steadily increasing share of the market, with much of the spending going toward fixing up interior spaces.

During those years, spending on exterior replacements and systems upgrades also grew, but at a slower, steady pace. “Looking ahead, though, the shares of spending across the broad project categories is likely to return to longer term averages. In fact, these changes have already begun to occur.” In 2005 through 2007, the Harvard researchers saw increased spending on basic equipment and systems upgrades and point to a number of reasons to expect further increases.

More people are expected to stay put in their homes rather than move. Those moving into homes tend to spend more on home interior projects and upgrades. “Longer-term owners, in contrast, devote a larger share of their budgets to system and equipment upgrades and to exterior replacements,” the report states.

How does the report see the remodeling industry changing? It foresees continued fragmentation, given the low barriers to enter the business, but it also suggests “the incentives for industry consolidation and specialization will revive.” More large, multi-disciplined remodeling companies are expected to emerge, but the researchers also suggest that window and door specialists, among others, could also play a growing role. “Specialized contractors can compete effectively with larger, diversified businesses in terms of service, staff training and certification, product purchasing power, and reputation—all by focusing on a key market niche.”

The remodeling market will grow again, but the industry will need to look at “new sources of growth” to help replace “those projects that are unlikely to return to levels achieved earlier in the decade.” The Harvard researchers foresee much of the growth coming from less upscale sources, including “the need to upgrade the nation’s aging rental stock, to meet the increasing demand for ‘green’ remodeling solutions, and to serve the rapidly expanding market of immigrant homeowners.”

The 38-page study, available for download, concludes with a variety of tables and data, including estimates for the size of the window and door segment of the home improvement industry. In 2007, it says 2.7 million homeowners worked with professionals on exterior addition or replacement projects involving windows and doors, spending on average $3,800, for a total market of $10.4 billion. On the DIY side, the report estimates some 1.9 million homeowners took on such window and door projects, spending on average $1,300, for a total of $2.49 billion.

The joint center numbers, based on figures from the U.S. Census Bureau, suggest window and door projects represent about 5.8 percent of $179 billion spent in total on home improvement projects involving professionals and about 5 percent of the $49 billion spent in the total DIY market.

Window and door data from the report is highlighted in the following three tables: