DALLAS — Plastics processors with sales from remodeling: Hold on to those remodeling hard hats during uncertain economic times, because new construction's little sister is coming into its own.
In fact, although you'll see slower growth in certain segments this year, the $180 billion remodeling market is expected to surpass new construction in terms of dollars spent during the next decade, said Kermit Baker, a senior research fellow at Harvard University's Joint Center for Housing Studies.
"Remodeling grows at about 2-3 percent per year," Baker said during a presentation at the Remodel America show, held March 29-31 in Dallas. "If you look at remodeling over the last 15 years, it's pretty steady, pretty stable."
According to the center's first comprehensive report on the industry, spending for home improvements and repairs grew from almost $150 billion in 1995 to nearly $180 billion in 1999. That's a growth rate of more than 4.5 percent per year, or 2.3 percent after adjusting for inflation. The remodeling market is so large, Baker said, it represents 2 percent of the U.S. gross domestic product.
The center's report identifies several factors affecting the remodeling market through 2010, including aging of the housing stock.
"A lot of remodeling happens when a home is 25-30 years old," Baker said, citing the construction boom of the 1970s. "There were more homes built then than in any other decade. A lot of these replacement projects need to be undertaken."
However, with current economic conditions, it's no surprise to anyone that remodeling activity has eased this year, Baker said. Remodeling consists of numerous distinct product segments, each with different cyclical characteristics, according to Baker. Growth may occur in some areas while slowing in others.
Replacement products such as vinyl siding and windows are in favor this year because of rising energy costs, Baker said. Toss lower interest rates into the mix, and things aren't all that horrible.
"In terms of both new construction and remodeling, some of the softening in the economy has been offset by lower interest rates, and new construction and remodeling numbers have seen slower growth but much stronger growth than other sectors such as manufacturing," he said. "It's been balanced a little more."
For plastics manufacturers that exhibited at the show, remodeling represents the majority of business. Miami-based Nailite International Inc. estimates that 75 percent of its siding business is in remodeling.
"We're very positive about the first half of the year and less concerned about the second half," said President Howard Wasserman.
Window profile extruder North Star Profile Extrusion of London, Ontario, targets remodeling, said sales manager Jesse Dyck.
"We prefer it that way," Dyck said of North Star's 75-80 percent of business gained from remodeling.
For those less-cyclical sectors, Baker said: "Business is not going to dry up as much as it would for upper-end kitchen and bath remodeling, room additions, things like that."