On the heels of an inconsistent 2012 market, remodelers are slightly more optimistic headed into 2013. The improving housing market, low interest rates, and the close of the presidential election season are some of the factors behind the optimism. Regionally, East Coast remodelers are expecting a slight bump in business due to projects related to Hurricane Sandy; however, they do not expect this to make up the bulk of their business in 2013.
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Approximately 70 percent of remodelers expect revenue to increase in 2013, according to the latest Professional Remodeler research. Eighteen percent of remodelers expect no change to their revenue stream in 2013, and 12 percent expect revenue to decrease.
That optimism contrasts with the end of 2011, when remodelers were pessimistic about increasing their revenue in 2012. In last year’s survey, 29 percent of respondents expected their revenue to increase, 42 percent expected their revenue to decrease, and 29 percent expected no change to their 2012 revenue when compared to 2011.
The presidential election, natural disasters, an improving housing market, and record low interest rates are driving projections of strong gains in home improvement through the end of 2012 and into 2013.
Business increased in 2012 compared to the previous year for 46 percent of remodelers, helped by a late-year bump in activity driven by interest rates and an improving housing market. Meanwhile, 34 percent said their revenue was down in 2012.
From inconsistent to acceleration
The Leading Indicator Remodeling Activity (LIRA) published by Harvard’s Joint Center of Housing Studies revealed an inconsistent market in 2012. Last year’s mild winter resulted in an increase in remodeling work in the beginning of the year. After the unexpected increase, remodeling work slowed down during the summer.
According to the Joint Center, the LIRA is projecting an acceleration in market activity beginning in late 2012 and strengthening into 2013. The majority of remodelers who responded to our survey share the LIRA projection for 2013. Eighty-eight percent of respondents are expecting 2013 revenue to either stay flat or increase over last year’s remodeling revenue.
Lead activity for 2013 is on the upswing as well, despite 31 percent of respondents indicating that their 2013 lead activity will remain unchanged compared with 2012. Nearly 50 percent are seeing more leads for remodeling projects in 2013; 43 percent have seen leads increase up to 25 percent. Another 6 percent of remodelers indicated that leads have increased more than 25 percent for this year. Twenty percent of remodelers have seen their 2013 lead activity decrease.
In accordance with the increase in revenue predicted for next year, remodelers are anticipating some growth to the average job size in 2013. Thirty-three percent indicated no increase or decrease in the average remodeling project; 55 percent anticipate larger jobs, and 12 percent smaller jobs. Two-thirds of remodelers expect the average job size to be within 10 percent of where it was in 2012.
Even so, remodelers remain skittish about adding employees. Only 30 percent plan to add to their staff next year, and 6 percent indicated they would be reducing staff. Sixty-five percent of respondents indicated they would not change their current staffing levels for 2013.
Only a small portion of respondents (3 percent) plans to cut prices in 2013, as remodelers continue to try to protect their margins. Forty-three percent of remodelers are increasing their 2013 prices, and 53 percent responded that they are keeping their prices the same next year.
The challenges remodelers expect to face in 2013 are the overall economy, competition from other remodelers, managing cash, and finding qualified employees, which make up close to three-quarters of the responses. Consistency in the market is also a concern for remodelers, with reports of busy months followed by slow months.
Opportunities are plenty. New clients, continued work with clients for life, new technology, and diversification make up approximately 80 percent of responses.
Specific market segments are expected to see an uptick in 2013 as well. Kitchen and bath projects should increase as homeowners begin thinking about upgrading as they consider selling their houses. Such upgrades return good returns on the investments.
Many remodelers plan to hold steady when it comes to investing in marketing. Sixty-three percent indicated no change from their 2012 budget. Slightly more than two-thirds of remodelers plan to spend their marketing budget in three areas: websites, networking and e-mail marketing. Print advertising, direct mail, and online referral sites make up the top areas of reduced spending.