Housing Bubble Pop 2.0: Remodeling Collapses To 1 Year Low

Tyler Durden's picture

On the way up, every sell-side strategist points to remodeling as a leading indicator for the housing recovery as confidence in the value of their home prompts real people to "invest" in upgrades and remodel their homes. That has been the story... until now. As NARI reports, the Remodeling Business Pulse (RBP) data of current and future remodeling business conditions show current condition ratings fell significantly in March - in fact they fell from multi-year highs to one-year lows as "homeowners remain slow to make the decision to move ahead with higher-priced projects." Of course, weather is blamed, and they are 'optimistic' about the future, but one look at the chart below and it is clear something changed...



As NARI reports,

Business conditions during the first three months of 2014 dropped to 6.07, down from 6.51 in December.


There was a decline in all but one of the sub-components that drive the overall current rating. Conversion of bids and sales value of jobs had the largest dip.


Growth indicators in the first quarter of 2014 are as follows (rating is from 1 to 9, where 1 is much worse than a year ago and 9 is much better; 5 is about the same as last year):

  • Current business conditions fell to 6.07 (from 6.51 last quarter)
  • Number of inquiries remained flat at 6.24.
  • Requests for bids had a slight drop to 6.16 (down from  6.22 last quarter)
  • Conversion of bids fell significantly from 6.03 to 5.71.
  • Sales value of jobs sold declined to 5.84 (down from 6.27 from last quarter).

More certainty about the future moved down to the No. 3 spot, at 39 percent.

h/t @CalConfidence

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Stoploss's picture

That's because Blackstone is done remodeling...

max2205's picture

Print janet....print!  You dumb _unt

Deathrips's picture

"Our House, is in the middle of the street"



Doña K's picture

"Ours is at the end of one way street"


TruthInSunshine's picture

A True Tale Of Intentional & Adverse Distortion of the Price of Construction Materials Thanks to Federal Reserve Monetary Policy

Speaking of price of construction materials (which impacts both renovation demand & new construction), the cost for just one square (10' by 10') of standard grade shingles (like IKO) is now about $90 to $100.

That doesn't include installation costs.

This same square was approx $70 to $75 in 2010 to early 2011ish.

That's just one example of building material costs rising 30% in the last 3 years, despite new construction being at 1960s levels (and off a peak of 2,200,000 units built in 2006 to 400,000 to 450,000ish today).

And shingles, whose main constituent production input cost is the price of a barrel of oil, are now 35% more expensive with oil @ 102/barrel than they were when oil was @ 140/barrel in 2007.

That's just shingles; Lumber, sheetrock, CONCRETE, brick, insulation, nail/fastener, OSB, window, etc. prices have all similarly risen, more or less, in that same time frame, despite there being a literal 25% of the new construction vs 2006.

It's so distorted that Georgia Pacific, Weyerhaeuser, USG, etc., closed many sheetrock, OSB, shingle, insulation making facilities to try and boost per unit margins (which meant layoffs and closed manufacturing facilities).

Do you see how the Federal Reserve-Wall Street Commodity/Financialization-Industry Racketeering Visible Hand screws up price equilibrium, and sets us up for massively distorted economic disequilibrium that leads to the next CRASH.

macholatte's picture


That article is Bull Shit. Me thinks the key to it is Home Depot & Lowes.  Here's just a sample:

Home Depot, which gained almost 3%, stands to gain the most from a resurgent housing market. The home-improvement retailer also got a positive nod from an industry analyst this morning, with the report pointing to solid results in areas that weren't affected by the cold winter weather earlier this year. In addition, with costs for materials looking somewhat favorable, Home Depot could be in a great position to capitalize on increased demand from shoppers as the company enters its key spring season.



And don't forget about Lowes.....

Home improvement retailer Lowe’s released its Q4 earnings results on February 26. Earnings for the quarter stood at $306 million, a gain of nearly 6.3%. Net earnings were propelled by top-line growth as a result of the steady recovery in the U.S. housing market driving consumer appetite for home improvement products. The company’s net sales for the quarter stood at $11.66 billion, an increase of about 5.6% over Q4 2012.



El Oregonian's picture

The only remodeling of any value is your Underground self-sustaining bunker. Anything else is just worthless window-dressing.

TruthInSunshine's picture

I heard that pneumatic nail guns* & compressors were flying off shelves!

*Even in states where the nail gun magazine is limited to 10 or less by the Schumer-Feinstein Anti-Assault Nail Gun Legislation.

Luckhasit's picture

Haha, that actually made me laugh.

agstacks's picture

Oh man, the gloom and doom! EVERYONE KNOWS people do not renovate their homes in the warm spring! They are out on the boat, or golfing, or otherwise enjoying this fine weather! Home renovationg is most popular in the winter when no one is outside.  This number will pick up once the nice weather subsides, for sure.

ebworthen's picture

Eh?  You want to be hauling the old cabinets and flooring, and the new stuff, in the cold and snow?

Not to mention you can't open the windows to breath after gluing the flooring and counter-tops, or painting.

Stupid people might do this.  Winter is for billiards, bowling, and banging.

agstacks's picture

Your sarc meter needs a tune up.  :)

ebworthen's picture

Pretty subtle there, very dry, have to re-adjust as there's been lots of dripping sarcasm lately.

"Golf" should have been my tip-off; right_over_my_head.  Cheers.

NotApplicable's picture

I just read everything in a sarcastic voice.

ArkansasAngie's picture

And ... of course ... investors ... such as myself ... can't find anything priced appropriately to start any new projects.

For me ... economic value is determined by the price of the home plus the cost of the remodel.  Then I assume a 6% cap rate based on 40% costs.  I use current rents and don't assume rents going higher.  

There hasn't been any such properties since last August.

greatbeard's picture

I have to concur with your assessement.  I'm an amature renovator and I've been looking to move to my next project.  I've got a willing buyer for my current house at $25K over what I was asking (admittedly low), but I can't find a viable "next" project.  All the projects are priced at finished project prices.  In spite of this, they seem to be selling them.  But I have to go by my instincts and hold fire until I see a project I deem worthwhile.

Just as an example, I was doing comps on a $175K, 2000 sq ft, 1 acre property.  In Jan of this year, a very similar house a few doors down sold for $94K. I'm seeing that all over the Florida West Coast, houses selling for $70K to $90K and going right back on the market @ $150K to $200K.   And those aren't repo sales numbers, those are houses that were on the market, bought by specs and jacked up with no renovations.

CrashisOptimistic's picture

No one even TALKS about this kind of thing anywhere other than NYC area, San Fran area or MAYBE Orange county or . . . west FL coast.

Somehow those tiny areas have been accepted as "THE US".

You will not find this shit in Lincoln Nebraska.  You won't find it in Des Moines.  Or Missouri.  Or pretty much the vast majority of the US of A.

daveO's picture

There have been houses on the market for 4+ years, around here(NC). The only ones that move are repo's that are priced 33-50% below tax value.

NotApplicable's picture

Nothing is rarer these days than seeing a "SOLD" sign on a property. Shit just sits and sits until the "sellers" give up and pull it off the market.

ArkansasAngie's picture

Id be asking for my tax basis to be lowered

greatbeard's picture

>> MAYBE Orange county or . . . west FL coast.

I much prefer, and operate much better, in a depressed, or at least less frothy, market.  I've been priced out of our local market.  I tend to sell a very nicely cleaned and renovated property at a decent price.  My properties tend to stand out from the rest do to all the details being taken care of.  This local market is all sizzle and no steak.  That is not good when your technique is all steak and no sizzle.

Also, the realtor, shitbags as they normally are, have taken full advantage of the local conditions.  The properties I've looked at lately, I've been told most offers are coming in over the ask and usually there are multiple offers.  I can't operate in that environent.  I just talked to a really snotty bitch yesterday.  I went to her company web site to see if they had additional photos of a property I was contenplating.  They had about 35 to 40 listings.  Fully 40% of them were pending. Two months ago, when I first put my property on the market, I had a list of 15 or so potential properties.  As the action was fast and furious on my property I decided I'd better step up and buy my next place now.  In the few weeks I took my eye off the market getting mine marketed, 13 of the 15 potential properties went under contract.  Anything new replacing that inventory is priced 30% or more than what I was looking at.

On the bright side, I never buy a property I wouldn't want to stay long term in, and when I do renovations, it's with the mindset that I'll be here until the day I die.  So my current digs are not a bad hangout until this blows over, if it does.

Professor Fate's picture

I think you just need to hang in a little longer.  I was on Trulia last night (Fort Myers) and I pulled up about 60 pages of properties in my parameter.  After I got to page 17, they all become Lis Pendens, Foreclosure, etc.  Modest homes in Cape Coral and Fort Myers got vacuumed up by the buy-to-rent hedgies over the last year but that's done.  I think another major decline is "coming soon" to a theater near me.  I'm in "wait a bit longer mode"

Fate the Magnificent
"Push the Button, Max"

ebworthen's picture

I've noticed a lot of Lowe's and Home Depot commercials lately, both with 0% credit offers.

BandGap's picture

We bought all of our bathroom and kitchen fixtures at Home Depot recently. EVERY item was cheaper than Amazon or Lowe's. Next up, light fixtures.

Sears has discounted appliances at least 20% in the past year, too.

There is a disturbance in the force.

astoriajoe's picture

I just count the cars in the HD parking lot on Saturday afternoon. During '07, I would have to drive around for a few minutes to find a spot, or even go to the Staples area across the parking lot.  I've seen it at maybe 35% capacity a few years ago. Not sure where it is now.

centerline's picture

Was just a Lowes last weekend, late morning.  Parking lot was like 5% full.  Has been that way for awhile.  On the other side of town, maybe 25% to 30% during the week... much of it likely contractors as opposed to home owners.

Most homeowners are barely even maintaining property now.  Let alone remodeling.

ArkansasAngie's picture

I'm getting calls from Lowes all the time.  Please come and buy something.  I tell them I don't have any projects. 

We have a few project here in NWA that per rumor are being pulled because the money that was freely flowing ain't no more.  

I'm not budging from my requirements on Cap Rate.  I bet by the end of summer I might be able to start buying again.

Caviar Emptor's picture

Cost of home ownership? Up big
Cost of living? Up large
Cost of working? You know..

Your income? Lol

Seasmoke's picture

Why would anyone want to remodel. ???


1. The cost of the remodel. 

2. Increases property taxes for the public parasites. 

3. You don't own your house. Foreclosure by a criminal servicer will be even easier by having equity....much better to be upside down, nowadays. 


Who said 2008 was such a bad thing. I think it was a wonderful awakening. 

max2205's picture

Its win win.....and if the stock market crashes it's win win win....but not for you

Bastiat's picture

It should have been allowed to play out.

daveO's picture

It will. Either by market forces or a total collapse of the currency. Laws of nature have only been postponed.

NotApplicable's picture

Until such a time as the proper blame can be diverted to other parties.

centerline's picture

A neighbor of mine made the mistake of asking my if was remodeling my house at all.

I told him I wasn't putting a nickle into it beyond what is needed to just maintain it in good condition.  That I haven't a clue where the market is going, where I might be going, etc.  except that the economy/financial systems as we know them are going to implode at some point sooner rather than later.

I could almost see the smoke coming out of his ears.

Winston Churchill's picture

If it wasn't for concentrating on the 0.1%, as I have
since 2008, I would not be eating from my biz income.
Much as I hate having all my eggs in one basket, chickens
everywhere else are just not laying.
Obozocare and bigger taxes took out the steam in any spending by the little people around Christmas time.
Just waiting on the RE crash now.

NotApplicable's picture

I'm of the opinion it will never crash, given it's already been completely destroyed and left in a zombiefied state.

When is the new and improved Fannie/Freddie replacement being rolled out? My guess is it will finish of what's left of the non-luxury market, in an effort to nationalize housing.

I'm sure the whole thing will be every bit as successful as the nationalization of the airline industry.

Relentless101's picture

Housing bubbles will continue for a long time to come. This one will eventually pop and then rinse and repeat. The "American Dream" and "owning a home" are so tightly correlated in the minds of the american sheeple that they will forever poor most of their net worth into housing. Not everyone should own a home. Period. It is just another asset class, the same as equities, bonds, FX, it is a bet on the future in some way. What decent investor in their right mind would ever fucking poor nearly all of their funds into one investment. It is stuuupppiiiddd.

greatbeard's picture

>> What decent investor in their right mind would ever fucking poor nearly all of their funds into one investment.


daveO's picture

Gold is money, all else is credit. JPMorgan 

Strider52's picture

I remodeled my gold & silver. It looks shinier now.

Deathrips's picture

I do that while I play with titties.



buzzsaw99's picture

flippers are the only ones who remodel. i looked at a bunch of crappy houses a few years ago. many people around here spend NOTHING on maintenance. Not even a five gallon bucket of paint in twenty years.

daveO's picture

People are essentially renting houses from banks, these days. That began, in my mind, in 1997. That's when the FHA(maybe others, too) lowered their standards. It became almost impossible to find good renters after that happened. I was directly competing with banks for renters. Renters ain't gonna do nuthin' to maintain a place.

buzzsaw99's picture

what's funny is that people who let their house run down still expect that magic appreciation after a few years.

I Write Code's picture

That mostly works in Los Angeles, where 90% of the value is in the land.

Bunga Bunga's picture

You can count on the Federal "Central Planning" Reserve. They can produce bubbles like a clockwork.

I Write Code's picture

AFAIK the Los Angeles market remains relatively strong, tons of Chinese money I assume, and developers looking to service that money.

Was just noticing the remodels and rebuilds around the hood.

The rest of the country, I dunno.

Goggles Pisano's picture

There is a "National Association of the Remodeling Industry"?