Everything but the kitchen sink

One of the reasons I see home improvement as a bellwether category for the recovery: Home destruction was a bellwether of the recession.

My wife and I were among those folks who were able to sell one home (by choice) and buy another during the recession. It was about one year ago we learned that our existing home had sold, so we were shopping the menu of foreclosures and short-sales with considerable intensity… to find our real estate “deal of a lifetime.”

Among the candidates, we saw a remarkable number of homes that had been stripped, if not nearly destroyed, by the people who had recently lost or abandoned their houses. In one of the most extreme examples, we found a beautiful house that had been stripped of kitchen cabinets, water heater, central air conditioner, woodwork, several plumbing fixtures, electrical switches and recepticles, and a fireplace mantle. (The listing price of $199,000 belied its original selling price of $400,000... about a year earlier.) Almost everything had been removed… including the kitchen sink. Not taken but damaged severely in an apparent fit of rage: The furnace, the bathroom fixtures, and the main waterline supplying water to the house (which was smashed below the shut-off valve, resulting in a flooded basement). A recent story in the New York Times shows that our findings were particularly rare... at least, not in recent history.

My wife and I settled on a home that needed a little less repair. But right about now, I’m confident that lots of folks who found their way into a “deal” on a broken-down home are discovering that the repairs involved are over their heads.

Implications: Electricians, plumbers, carpenters and other sub-contractors are less busy with new home construction, due to the over-supply that generally exists in most real estate markets right now. The good news is that existing home services should be a very hot category, fueled, in part, by the number of people who are taking advantage of the current real estate market to take a home from “abandoned,” to “amazing.”

That service sector is further enriched by our departure from the “disposable economy.” More people are hanging-on to appliances, cars and other durable goods for longer periods of time. (Think of it as “stretching the buying cycle.”) This is especially true in the home… where many people might be “upside-down,” owing more against their home than it could be sold for, given current real estate prices. Many homeowners might find it difficult to sell and then buy into their dream home… and are thus more likely to turn to home improvements, as a means of making their current home more closely conform to their dreams.

Various local and federal incentive plans stand to put more buyers into the real estate market throughout 2010. But for now, home improvement (sales, as well as service) is likely to be the category that benefits nicely from the current “fixer-upper” climate.

Mike Anderson