Remodeling Revisions: Expanding Market During 1999

In a startling revision to previously-published figures, the Commerce Department in late July released estimates showing that home improvement and repair rose between 1998 and 1999, after preliminary estimates had shown a substantial decline during the first six months of the year. Even more startling was the government's revisionist take on the dollar value of the market. In one fell swoop, the size of the home remodeling/maintenance & repair market was revised upward to show spending about 15% higher than the annual average for the past 15 years.

The quarterly survey which collects information on expenditures for improvements and repairs of residential properties has long provided estimates that have been regarded with skepticism and suspicion by analysts who follow the market. The numbers simply haven't shown the dynamic growth that builders and remodeling contractors have been reporting, at least anecdotally.

With the most recent comprehensive program revision, the quality of the information collected in this survey is now presumably much improved. Government statisticians have incorporated new weighting and tabulation procedures which don't have much affect on spending estimates for maintenance/repair or for major replacements, but which increase dramatically the estimated amount of money being spent on additions, alterations, and other long-term home improvements and investments. Another long-standing concern of market analysts -- the timeliness of survey data -- has yet to be satisfactorily addressed by the Commerce Department, however, since no year-2000 information on the market of any sort was yet available when we went to press in mid-September.

Given our earlier skepticism about the accuracy of survey estimates, we're not surprised that the total market is now estimated to have generated spending of $142.9 billion during 1999. We're just blown away by the breathtaking scope of the revisions, though -- and the fact that the market-size revisions go back almost 20 years. For the fourth quarter of last year, total expenditures were estimated at a seasonally-adjusted annualized rate of $165.2 billion -- an all-time record high. This was 12.2% above the solid third-quarter level of $147.3 billion, and a whopping 34.1% ahead of the total-market estimate for the final three months of 1998. Spending on maintenance and repairs increased by a scant 0.9% between the third and fourth quarters of last year, but October-December spending was estimated to be 12.1% higher last year than during the same three months of 1998. At the same time, spending on home improvements was estimated to have surged 16.9% over the final two quarters of 1999, and to have been 44.3% greater (on an annualized basis) during the final three months of 1999 as over October-December 1998.