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welcome to the Deerwood Realty YouTube channel I'm John Schink founder and managing broker of dearwood realy in St Louis Missouri I came across an article today that I thought was kind of fascinating in talking about um how the Home Remodeling industry is going uh wanted to tie it in with the home uh housing market in general because uh they're I think they're quite uh quite mixed basically um let me go into the article here it's from Yahoo finance it says America's love for Home Remodeling cools off amid higher interest rates now I'm going to go and kind of parse through this one pretty closely because I used to be a home I used to work in Home Remodeling I used to know quite a bit about that business and um I kind of just wanted to share my thoughts as we go along in the article uh to to what I would see you know if if if you were me so it says during the pandemic which will automatically get my my show knocked down Shadow band in YouTube for something that happened I don't know why it's just it's ridiculous but it's still happening uh Demi Fox a homeowner and realtor was Ultra focused on upgrading her home taking on Remodeling and DIY projects but now fox has put the brakes and is less willing to do out money for upgrades for her semam Valley California home we were going to do the kitchen but we're holding back right now looking at the numbers I said nah I feel I like using my own money when I remodel I don't like to use any kind of loan so it's kind of interesting the way they start this article because they're talking about how uh it's become expensive to finance repairs yet the person they quoted to start is paying cash now let's just let's just offer that perhaps because she's a real estate agent she has a pretty good idea of what her house will sell for at any given in point of time so perhaps she believes that the work that she does in her home okay to remodel it isn't going to be worth it if she had to sell tomorrow I'm just saying Realtors are pretty pretty slick about that kind of thing uh so here's the here's the you know here's the reasons why things are slowing down it says less savings higher interest rates and the lack of housing activity in the resale Market Market are among the reasons the industry is bracing for a Slowdown and I think that's fine that's a Slowdown is already happening it says total spending on Home Improvement and repairs is projected to drop 7.7% over the next four quarters to 452 billion researchers from Harvard University's Joint Center for housing studies a latest leading indicator of remodeling activity showed the decline expected in 2024 if that comes to pass be the first decline in more than a decade which if you if you think about it I mean 202 2012 that was when you know things started to get better in the housing market after the uh great financial

crisis 2008 2009 2010 it says data from the National Association of home builders showed remodel conf remodeler confidence slipped in the third quarter of this year with the index measuring current conditions falling for projects of all sizes and the index gauging future activity rate which leads inquiries are coming in and the backlogs of jobs also declining so they are saying that the sizes of the jobs are smaller um and the inquiries like leads coming in are less and the backlogs of jobs are

declining so during like the last rush I don't know if it's true now if you wanted to get a plumber to come out and do do something at your house it was like two week wait and I have a friend that's a that's a plumber and he says that you know younger people just don't want to do the job it's a dirty job um and it's not it's not glamorous but it pays and it's going to pay more the fewer people that decide to do it so it's then they go into this it says the pandemic which will get me shadow Bann Unleashed Home Improvement demand in 2020 and 2021 the unique circumstances of the time made people rethink their relationship with their homes this is absolutely true it also made people reink where they wanted to live it wasn't uncommon for people to leave the city and move to some Far Away place so that they you know were free from whatever they were worried about says they thought they were going to be spending a lot of time at home for the next few years of the foreseeable future uh Eric finigan who's the vice president research and demographics of John Burns research and Consulting who told Yahoo finance now we need to remember this finigan because he gets quoted a ton it says we need to make this comfortable we need to make this livable and functional not just us working at home but also our kids doing school at home yeah so like how many of you during the shut down had your family members living with you and spending time with you for many many more hours than you ever imagined um sometimes that's a good thing other times it led to divorce and uh and stuff like that so yeah I definitely I mean one of the things that we ran into at my house is my I have a home office and uh always have it's it's in the basement and I'm totally happy with it but when my wife was working from home she didn't have any place to work so she literally sat at the kitchen table on un fortunately the kitchen table's in the middle of the uh kind of where it's the line of traffic and so like people would walk by all the time and she'd be trying to work it messed with her concentration so yeah I I uh I totally agree with that that was true and we also have to remember that the rates were very low rates were very low and house prices were going up so we'll get into that towards the end it says financing those projects got easier too three rounds of stimulus checks fat and checking accounts historically low interest rates made borrowing cheap cheap and home equity was soaring because of the housing market took off it was really easy to take cash out of or Equity out of the home we saw a huge spike in Cash out refinance activity which then showed up in account balances for people's checkings accounts and savings account so yes that's absolutely true um you know uh I we'll get in I'll do it a little bit later I'll do it later I'm sorry uh and then it says the things are shaping up differently now it's just a matter if money was cheap and now money is really expensive people are getting really cost sensitive and they're feeling a lot more conservative about putting money in their home now during this runup in sale prices of homes we saw um we saw uh Commodities costs increase we saw like it was it was hard to find a you know a washer dryer for a good price I mean you having trouble getting um refrigerators things of that nature you could buy one but it would take like 3 weeks to get here uh if they even knew when it was so there were issues um but overall you know for many people it made sense to remodel and stay in place it says during the first half of this year cash refinances told 24 billion down 14 41 billion in the first half of 20122 which is significant says credit cards are also an expensive option to finance projects the a average annual percentage rate on our credit card is more than 20% the highest level in at least 38 years now so I I I wonder how many people actually put Home Remodeling projects on a credit card maybe the materials but yeah at 20% interest not not a good idea it says the pullback in the home buying Market is also driving the Slowdown home owners are reant to sell their properties because they'll lose the historically low mortgage rate they secured during the pandemic so there's no reason for these owners to fix up their homes to sell which that's that goes totally against the idea that these people are expecting to live in their homes forever because of a low mortgage rate and therefore are going to fix the house up the way they want to I mean that's two different arguments says buyers on the other hand have to Shell out more money just to buy a home these days with home prices still at record highs and boring costs more expensive that doesn't leave a lot for renovations after move in and more buyers are turning to new homes this year because Builders can offer incentives on mortgage rates um so there's some truth to that if I mean I still I mean I have a hard time we have a subdivision going up across the Street very small houses for half a million dollars just doesn't seem like I mean yes it has all the amenities but it just doesn't seem like the right home now I would argue that the houses I've shown for the vast majority since the since you know the inventory slowed down have been you know homes that are uh life events happen so people died and moved people died or people moved to Assisted Living um people got divorced so they're not putting money in their houses right uh these people may have lived in the homes for like 20 25 years so everything's dated uh and so what happens is now you've got these buyers that have to buy a house or feel that they need to buy a house and they're going to these houses and they're like okay the house is stupid expensive right now and we have to spend a 100 or 200,000 just to fix the place up to where we would want to live in it so it's a bad deal it's a bad deal it says the impact on home sales um existing home sales in particular has been very meaningful a lot of remodeling does tend to happen around the time of the sale that's certainly not conductive this year if we don't have the sales and people won't be remodeling their newly purchased homes next year see that's what I my concern is is uh you know there's no question that when you buy a home or when you're selling a home that leads to some construction work and so if that if that if the transactions are down which they are that means there's less of a need for these Services well you know that's not there look at how many billions of dollars is in this in this particular Market it's it's not good to get I mean it will hurt somewhere we just don't know where it will show up it says a quarterly survey from John Burns research and Consulting found onethird of customers say they're focused on smaller projects and reducing project Scopes while 32% are shifting cheaper materials all to save on upfront cost and let me just caution you just to this look if you live in like an $800,000 neighborhood and you try to put in Low's lowest end uh stainless steel appliances I mean you're not getting you're no one's going to pay you for that I mean it better be if it's you know a million dollar house it better be a Thermador it better be nice appliances um and so you know you better be coming with granite you don't don't do for Mica I mean it just doesn't make any sense at all um bad remodeling is worse than uh not remodeling at all in my opinion um homeowners because what it does when people walk through your house and they see that you did a crappy job remodeling it they say well if they did such a bad job of the stuff that we can see what did they do Behind the Walls that we can't see and I'm just putting it out there and you say well that's not fair that's not that's not right I'm just telling you that's what buyers think uh when they walk through your house it says homeowners are are saying cost have gotten so out of control on materials labor and interest rates that many homeowners are saying these big nice to have home Improvement projects can wait for now I think I read that before I apologize says the housing stock is aging about 50% of homeowners live in a home that was built before the 1980s which means lots of kitchens bathrooms and roofs will need upgrades and it's kind of fascinating here in St Louis we've got houses in you know built in the 1920s where the plaster walls have never been redone they may have redone the kitchen they may have done the bathroom but everything else is like straight from the 1920s and it looks gorgeous it's it's weird it doesn't seem like certain houses have passed the test time I live in a mid-century modern home um and it's I mean I would not want to change it I mean it looks awesome now I mean there are problems I mean I'd love to redo the bathrooms they're um they're pink tile and pink toilets and the the other bathroom is blue toilet and blue tile but uh and you know blue shower but I mean whatever right right I mean I'm not moving says there's um there's a solid base of long-term homeowners that are moving forward with remodeling the projects these homeowners think older with a solid nest egg and looking to stay in their home for another 20 years want an want a home that accommodates their own changing needs you know I think that's always been the driver of of most of the construction I don't know I mean I've seen articles and I've seen people talk that people are going to downsize do you remember maybe a couple weeks back we had that article that said hey people are downsizing and the boomers are going to end up buying these starter homes because they don't want to have as big homes and it's going to drive prices even more crazy I don't know if that's true I don't know if that'll work out that way but anyway that's that's what they say and it says since there are so few homes available for purchase these homeowners are choosing to remodel instead of move the trade up in place phenomenon is keeping the Home Improvement and remodeling industry afloat and I would say that makes a lot of sense right you want to be um I mean you if you got a 3% mortgage and you've got equity in your home the key is Equity I know that when I bought my house I felt like I was at the top of the market okay and I didn't really I didn't really feel comfortable doing any upgrades but over the past 10 years okay the equity in my home has improved dramatically and so I was willing to do to take on projects like we did redo the basement uh finish the basement we did change out some bathroom or some we we did change out a bathroom in the basement but that was only because we had equity and as the as the article started with the real estate agent saying you know we're going to cut back on our our our remodeling for a home it was all based for me at least on what I thought I could get for the home when I sold it it didn't make any sense for me to uh over improve because I wasn't going to get my money for it so what do you think do you think that this slowdown and remodeling is something we need to be worried about for for the economy at large or do you think it's just a blip you think it'll all all work itself out I don't know it's strange times that's why I like talking about this kind of stuff I I I find it very fascinating I don't know what's going to happen in the future but I just I like to talk about it with the like-minded people so if you're one of those like-minded people and you've you've kind of been holding off on subscribing please consider doing so we're doing pretty well we could always do better uh and I'd like to take you know I'd like I'd like to have a bigger audience so we can talk about more things you can start sending me stuff with that I'm going to head on out thank you for watching thank you for listening and I'll catch you on the next one