No Recovery Here Either: Home Renovation Spending Plummets To 2010 Levels

Tyler Durden's picture

One of the widely accepted misconceptions surrounding the so-called "housing recovery" fanfared by misleading headlines such as this "Remodeling activity keeps up positive momentum", which in reality has merely turned out to be a housing bubble in various liquified "flip that house" MSAs (offset by continuing deteriorating conditions in those places where the Fed's trillions in excess reserves have trouble reaching coupled with ongoing foreclosure stuffing), is that "renovation spending", the amount of cash spent to upgrade and update a fixer-upper, has surged. In fact, the guiding light that renovation spending would be a key driver of the housing recovery was sufficient for BofA to release the following last August:

As homeowners take on long-delayed remodeling projects and real estate investors fix up distressed properties, the home improvement sector is getting its own makeover, according to a new BofA Merrill Lynch Global Research report.

 

“Spending on home improvement is a powerful economic force that will provide a tail wind to the remodeling and construction industry for years to come,” said Denise Chai, retail analyst at BofA Merrill Lynch Global Research and a co-author of the report. “As small-scale renovations give way to bigger ticket home remodeling projects and properties turn over to new owners, a wide range of companies and sectors stand to benefit.”

 

The analysts identified four sectors for investors to focus on: home improvement, home furnishings, building materials and appliance makers.

 

“While the home remodeling market is often overlooked, it is helping to lead the broader housing recovery,” said Michelle Meyer, senior U.S. economist at BofA Merrill Lynch Global Research, who provided economic insights as co-author of the report. “There are some near-term macro headwinds, but also strong underlying trends that will sustain spending for years to come, creating a long-term investment cycle.”

The report culminated with the following:

BofA Merrill Lynch Global Research expects this surge in home remodeling activity to be aided by a healing economy, eventually fueling a recovery in household formation and housing turnover.

The last sentence is somewhat ironic, because as Bank of America itself updated first thing today, its proprietary metric of Census Bureau data looking a renovation spending has imploded in the past six months to levels not seen since 2010! So much for the "healing economy" pushing remodeling activity higher? And so much for a recovery in household formation and housing turnover?

The Hurricane Sandy line, by the way, should be an upside inflection point, as households rushed to fix up their homes damaged in part or in whole in the aftermath of Sandy, not a downward one. The result is so stunning not even BofA can't believe its implication:

We have been quite puzzled with the recent data from the Census Bureau showing that spending on home improvements has declined sharply from November through March. Not only do we think the fundamentals dictate a gain in renovation spending, but some of the more granular data suggest a pickup. We suspect the Census data will ultimately be revised higher, either in upcoming monthly releases or with the comprehensive benchmark GDP revision released in July.

Or just maybe the data is right, and the reality, not BofA's misconception (there's that word again) of it, is that households are in fact quite tapped out when looking at actual, unmanipulated data, which incidentally would foot quite well with the seasonally adjusted winter strength (and unadjusted weakness) which always fades into a period of spring gloom, when the implicit benefits from the most recent liquidity injections once again fade.

Either way, with numerous housing indicator data already topping out and once more facing lower, expect the deterioration in renovation spending to accelerate further in the coming months as the reality of the US household's financial picture can no longer be supressed by various seasonal adjustmenst and distracting S&P500 legerdemain.

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GetZeeGold's picture

 

 

Yes we can.....but we chose not to.

Bearwagon's picture

In a not so distant future that could become: "No, we couldn't!"

francis_sawyer's picture

It's hard to avoid doing 'some' home renovation...

~~~

Practically everything is cheap shit made in China... It breaks all the time...

MachoMan's picture

It's hard to do if you don't build your own house and ensure what you put in it on the front end...  people are going to come to appreciate quality construction once the maintenance costs of all their spec houses and mcmansions become incredibly apparent.  Although, if you can't even afford the monthly note, then why would you even care about maintenance...

madcows's picture

Using quality materials costs a crapload of money.  Unfortunately, all we can afford is the cheap chinese shit, regardless of its lack of quality.

I hate HD and Lowes.  Their stuff really is cheaply made.  However, if the faucet craps out, I have to replace it, and it costs $100 from HD, but $350 from FW Webb.

My question is, will the Chinese buy our shitty stuff after we've collapsed and taken their place as the wage slave manufacturing dump of the world?

booboo's picture

Moen, guaranteed for life. Price Pfister and you are Phucked

ceilidh_trail's picture

Big box stores are CCC outlets. There actually is a quality grade difference between what is sold at big box vs smaller contractor suppliers. I stopped buying finish plumbing and electrical fixtures at big box because of the rapid decline in function/finish.

de3de8's picture

They will never admit that.

Rainman's picture

Bank of Lynch propaganda machine breaks down again....no surprise there.

CheapBastard's picture
Moody’s analysis contemplates 44% drop in Canadian housing prices[March, 2013]

 


 

Canada joins Spain, as well as the United Kingdom and Australia, in the ratings agency’s assessment of countries where growth in housing prices over the past 10 years has driven their values away from sustainable market fundamentals and into “overheated” territory.

“As with Australia, Spain and the U.K., we expect house prices in Canada to suffer the most due to the misalignment of current house prices with historic fundamentals,” Moody’s said.


 

http://business.financialpost.com/2013/03/11/canadian-house-prices-could...

ceilidh_trail's picture

From my travels to the maritimes and Toronto area, I've felt these markets have been overheated for a long time.

Scro's picture

Intangible renovations.

If I had a job I would put in the Kohler 74 head shower system that massages your privates.

de3de8's picture

Better hurry as soon to be outlawed on env reasons....uses too much water

Mercury's picture

Come on!

What the fuck does the Census Bureau know about home renovation?

The product mix may be different from ~'06 but look at Home Depot's sales figures.

fonzannoon's picture

I don't know if you are being sarcastic but I agree with you. HD and Lowe's is jam packed by me every day and twice as Jam packed on the weekends. Kitchen and bath stores swamped.

The shit must be seriously hitting the fan elsewhere to compensate for the spending utopia that sorrounds me.

Mercury's picture

http://finance.yahoo.com/q/is?s=HD+Income+Statement&annual

HD [Equity] FA [GO]

etc...

I'm sure far fewer people are tapping their home equity for a $80k kitchen makeover these days but there are many other types of "renovation" that go up when the economy and your personal finances are sucking wind.

Don't forget PE/hedge funds are big landlords now...and they probably didn't take the time for the CB's survey or whatever idiot data gathering exercise is behind this chart.

By the way, look at what a pain in the ass the Census Bureau has become under Obama: http://www.coyoteblog.com/coyote_blog/2013/05/wherein-i-tell-the-census-bureau-to-take-a-leap.html

Asshole.

Cursive's picture

@fonzannoon

Not seeing that here.

fonzannoon's picture

It's bizarro world. I posted a pic a few weeks ago of a house that was sitting dormant for years near my friends house. The place was a shithole of all shitholes. The owner moved away but refused to let the bank take the home for some reason. He was current on his taxes. You should have see the pics...

Anyway it went up for sale recently. I am at my friends house and I see Asian family after Asian family after Asian family walk in and out. The guy ended up with a bidding war and the house went for well over asking.

I bought my prison in 2007. Supposedly I am back near where I bought it less the 50k I dumped into this money pit. I am considering selling but I can't leave the state right now and rents are skyrocketing too.

Mercury's picture

What's your neighbor's street #?

Asians dig the number 8.

Never One Roach's picture

I don't see much house buying activity where I live anymore....used houses sit on the market for weeks and rentals too.....no one wants a "used house"....and builders are fiercely building over 8,000 new boxes north of here and handing out zero down or near zero down loans to anyone who can fog a mirror.....

 

One thing for sure is areas where lots of zero down houses were sold, they are turning into run down areas, prob since those folks could not afford them in the first place putting down zero to move it.

Other problem areas I see are the wall street investor areas where >16% of the houses are rentals...turning to slums almost since renters tend not to care about the house, or the neighborhood (in general) since they are short timers and have no stake in the place...sort of like public housing.

 

This article was very predictive:

http://www.nobleforums.com/showthread.php?8749-18-American-Cities-Whose-...

 

Watch what happens when gas prices rise further...

MilleniumJane's picture

Weeks?  Boy, your area is doing better than ours.  In our town, I can point out at least five houses that have been sitting with "Reduced Price" for 3 years now

pods's picture

Last time I was at HD there were so few people there that you could have NYC's finest shoot at a perp and nobody would be hurt.

pods

Oldwood's picture

There are hot spots, just as there were before. The problem is that those hot spots are generally driven by speculation...just like wall street. How do you think that will turn out? Speculation markets seem to always have been where the excess money or wealth goes to multiply. I really have to wonder though. I would assume that in decades past most of the money that pushed into "investing" was real earned income or accumilated wealth and therefor sustainable becasue it was based on real money. Today's speculation seems to be based almost completely on fake or borrowed wealth. Th efinancail crash was brought about by debt, right? When the stock market crashed in 29, wasn't a big component of the problem that people were borrowing money to buy stocks? Its seems to be one thing when you lose all of your money and and quite something else when you lose money you never had.

de3de8's picture

The hot spots are driven by govt money, either direct employment or " contractors".

Oldwood's picture

HomeDepot's numbers may be up but I would have to question how many of their competitors are dead and gone. This economy lies when looking at isolated numbers. Many individual businesses that show improved sales numbers have done so not due to an improving economy but because of reduced competition. How did Best Buy do when Curcuit City closed? I know that Lowes is still going prety well but lots of small independent hardware suppliers and lumber yards are gone. Big business is prospering at the cost of the small, with the helping hand of big Gov of course. Internet Sales Tax is next up of course. This is not growth but digestion. We are whats left on the floor when the process is done.

Fishthatlived's picture

You just can't make this shit up....except when you do.

the not so mighty maximiza's picture

your not squinting hard enough , there is a recovery there somewhere.

mayhem_korner's picture

 

 

LOL - coffee through the nose...thx

Never One Roach's picture

yes, the so-called, "jobless recovery".....whatever that means.....

TheMerryPrankster's picture

ie the recoveryless recovery.or Ben's big blue Viagra recovery, wait until the pill wears off, we'll see wall street is a flacid old dick with its skin worn off.

tornado_watch's picture

Pretty sure there is an intangible we can toss in there--maybe remodels that homeowners would like to do.

For what it is worth, when you strip out imputations, debt-to-GDP in the US already running 120%.

TeamDepends's picture

It's a safe (ha) bet they did not include money spent on safe/vault construction.

hidingfromhelis's picture

...or salvage vessels and sub-bottom sonar systems!

mayhem_korner's picture

 

 

Hedonic adjustment...if the kitchen cabinets fall off the walls, it will "even out" the look of the rusted sink and dying appliances, increasing the value by creating a more "consistent feel."

(hey, I like this 'make-it-up' stuff!)

TheMerryPrankster's picture

intangible good will and recalculate all the numbers going back to 1946, introduce an adjusted index with confidential weighting and classify certain years as state secrets. Voila any number you want, any time you want it.

The secret to data modeling is having the results before you make the calculations so you can make your math fit the results.

caimen garou's picture

now wait a minute, I just updated my fall out shelter! does that count?

mayhem_korner's picture

 

 

Not unless you want the tax assessor and the drones to keep tabs on it.

caimen garou's picture

just added a bar and pinball machine, may be able to have our tax lady for drinks! cant do anything about drones, they already have pictures of everything on google earth!

mayhem_korner's picture

 

 

Ummm...what's your "tax lady" look like?  'cuz I've got a picture in my mind of Madame Aqualung.

LawsofPhysics's picture

The country didn't revolve around New Orleans after Katrina, why the fuck should it revolve around these new england states after Sandy.  Fuck em, especially new york. 

mayhem_korner's picture

 

 

LOP...I know you didn't mean it this way.  But please, please, never confuse New York with New England. Even amidst the froth of libtards, the rolling hills of New England will forever be greater than the filth that is the Empire State.

fonzannoon's picture

Nuh Uh Mayhem. We are all in this together, come on now, group hug.

LawsofPhysics's picture

Please, aside from maybe New Hampshire, guess who is the single largest employer in all of these states (hint- it's the fucking state).  I grew up in Maine, just outside Belgrade Lakes, these people have long suffered from cognative disonance, many claiming to be conservatives, yet all supporting the state machine and their pension-for-nothing dreams.  No one wants to support these bloated pensions anymore and they wonder why business is going everywhere else.  I tried to move a cattle business back to New England, after considering the costs it didn't happen.  Sorry, I sure as hell meant it.  Mom still lives there with many other retirees.  She even admits you can't support fat pensions for old folks without decent paying jobs for the young folks.

mayhem_korner's picture

 

 

But Dave Roberts is better than Bucky Dent. 

(btw...the people outside of Belgrade Lakes mostly suffer from a highly-correlated gene pool.  Not you, of course). 

LawsofPhysics's picture

My family came to the U.S. during WWII, they served in order to recieve citizenship. many died.  Imagine fucking that, sacrafice for citizenship, both my father and I served as well.  After the war, my grandfather moved to Maine to work in the paper mills.  Please, we know about building something from the ruins of nothing and have never been tied to one area, (admittedly many there are) so what's you fucking point?  Did I not answer your question.  Personal attacks do little to advance any cause, especially if it is bullshit.  if New England wants businesses to grow tell those old farts to start spending their money more wisely, cut taxes, and shrink the fucking state employee pool and pension.  It is what it is.

mayhem_korner's picture

 

 

I was joking, LOP.  Get over yourself.

LawsofPhysics's picture

Not really keeping with the "mayhem" moniker then.  Trust me, I have tried to do business in New England and still have many relatives there in several states.  I'd say about half work for the state and the the other half work "under the table", which of course only makes things worse, but hey if you are really going to tax things like soda and rainwater, then this is what you get.

mayhem_korner's picture

 

 

I completely agree with you...the place is an effing disaster.  I currently live in one New England state and have lived in two others - since the late 60s - so I know the region very well and am attached to it despite the debacle that it is. 

I have also traveled a LOT - been virtually everywhere in the US and abroad.  My view is that the sheeple in New England - the good folk, not the elite - are honestly oblivious of the statism that ails them.  But they are very good natured people, once they warm up to you (in contrast, if you go to, say, Tennessee, the folks there are immediately warm and hospitable, even if equally in the dark.  And the midwesterners have that quiet, welcoming feel about them.)

But New York City is a true Babylon in my eyes.  Too many people come from around the world to work there and turn into top-flight a-holes.  It's the most overstated place I've been exposed to.  So I get a little chapped about the NE-NY thing.  But you're absolutely right - neither is a welcoming place for any sustainable economic activity.

Bastiat's picture

Upstate NY is very different from NYC , though.