Home foreclosures have been a high-profile story in the news over the past 18 months, and rightfully so; it is among the most financially traumatic experiences a family can suffer. But while an inordinate number of people have gone through foreclosure during The Great Recession, even more people find themselves “upside down, but not drowning.” These are people who might owe more on their home than they could sell it for… but who are managing the payments and getting by.
With that in mind, we partnered with America’s Research Group to ask 1,000 consumers some home ownership and home improvement questions during their most recent Consumer Mind Reader™ study. We wanted to understand how the economy might be impacting the categories of real estate or home improvement.
First, we asked these 20 to 59 year-old consumers whether they had postponed selling their home; more than 10% said they had. (According to C. Britt Beemer, the chairman of ARG, this number would historically be as low as 4%.)
Then, we asked whether they had decided to delay some major home improvement. This time, some 15% said yes.
Among those who had delayed a home improvement, we asked, “What kind of home improvement project did you delay?” Their answers, in descending order of volume:
New appliances: 32.2%
Add patio: 16.1%
Replace electrical switches/items: 14.8%
Remodel bathroom: 12.1%
Kitchen cabinets: 10.1%
New Kitchen: 7.4%
Replace windows/doors: 6.7%
Finish basement: 0.7%
We wanted to know what kind of pent-up demand might exist among people who said they had deferred a home improvement. So next, we asked this group, “When the economy turns around, how likely are you to undertake home improvement again?” A promising 53.7% said, “Very likely,” and another 45.6% said, “Somewhat likely.” Only 0.7% said they were unlikely to resume home improvement.
Further, we asked “When the economy recovers, which home improvement project will you seriously consider?” Here are the responses, in order of response volume:
New appliances: 11.7%
Remodel bathroom: 8.3%
New kitchen: 7.4%
Add patio: 7.2%
Replace windows/doors: 6.6%
Kitchen cabinets: 4.8%
Replace electrical switches/items: 3.1%
Finish basement: 1.1%
Finally, we asked respondents what might motivate them to move ahead on a particular project. Here are their reactions:
38.9% replied, “Existing (room/attribute) is dated.”
29.9% said, “Return on investment.”
17.3% responded, “A change in family size.”
12% answered, “The amount of time I (we) spend in that room.”
2% replied, “I don’t know.”
Implications: In many categories, the consumer has been the beneficiary of “deflation” (falling prices). But where home ownership is concerned, consumers are the ones suffering the side-effects of declining values. The recession has obviously caused some to defer their home improvement spending. But many are ready do “jump back in” when the economy turns around.
It looks to me like one motive might be to regain some of the equity their home may have lost during the recent real estate meltdown. (More than 38% of the people who intend to resume home improvement cited the “dated look” of their existing room, and 30% attributed “return on investment.” Only 12% said their home improvement project would be driven by the amount of time they spend in a room.)
The kitchen might be an early benefactor when home improvement resumes. When you add appliances, new cabinets, or kitchen overhaul together, more than 23% of the improvements people intend to resume take place in this “command central” portion of the home.
Special thanks to C. Britt Beemer, the chairman of America’s Research Group, for inviting CSS to contribute questions to be used in the September Consumer Mind Reader™ study. (Many of you will recognize Mr. Beemer as the co-author of best-selling books like Predatory Marketing, It Takes a Prophet to Make a Profit, and most recently, The Customer Rules.) Every other month, America’s Research Group (ARG) surveys one thousand people (age 20 to 59) to gain insights about their shopping behaviors and purchasing intentions. Those findings are subsequently published in Consumer Mind Reader™ studies for the clients of ARG.