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Food for Thought: Profiling the Market at the Remodeling Show

Breaking down the Residential Remodeling Index

In a late afternoon seminar at the recent Remodeling Show titled “Burgers, Beer and Intelligence,” I skipped the food but got food for thought instead, learning about new market data called the Residential Remodeling Index (RRI). Produced by Hanley Wood Market Intelligence, the research division of the Remodeling Show’s parent company, Hanley Wood, the RRI measures local home improvement activity and defines the household characteristics that drive remodeling demand for contractors, designers and their suppliers.

The RRI is a quarterly report covering home improvement and replacement activity in 366 metropolitan markets (It does not include residential repairs, however.) The seasonally adjusted index shows the relative level of activity in each city compared to 2007, a year that represented the peak of remodeling activity, nationally, in the prior 10-year period. An index of 100 or above indicates a current level of activity higher than it was in 2007.

I got a copy of the most recent RRI for Washington, DC, where I live. It contained index numbers for several hundred Zip codes within the Washington, DC, Metropolitan Statistical Area. My Zip code has a remodeling market activity index of 88. One of the only scores at or above 100 was for Gaithersburg, MD, a suburb of Washington, DC, that has more than 45,000 households and a healthy number of “Elites,” a household type that represents the sweet spot for remodeling spending.

Targeting "Elite" households

Elites is one of nine consumer types profiled in the RRI and explained in detail during the Remodeling Show seminar, and they added up to perhaps the most interesting part of the presentation by Jonathan Smoke, executive director of Hanley Wood Market Intelligence. Elites, he said, are “one of three key groups that are most important to remodeling.” The other two are “Active Adult Elites” and “Family Life.”

Active Adult Elites are 55 years old on average. They are wealthy and for the most part employed in management or professional jobs. They have a national average income of $75,000-$150,000, and 97% own their own homes. They are likely to be members of a country club and heavy watchers of cable news. They go to the opera and contribute to PBS and trust what they read in magazines. They are referred to, in Madison Avenue terms, as “Cosmopolitans.”

Elites are very much like Active Adult Elites, except they’re younger (35-64), better educated (most have post-graduate degrees) and even wealthier, with average incomes of more than $100,000. They account for 9% of all U.S. households. More than nine of 10 own homes. According to Smoke, they have “custom tastes, shop at Nordstrom, spend a lot of time on the Internet and watch golf on TV.” In the parlance of market research, they are referred to as “Movers and Shakers.”

"Family Life" is the third group. In it, Smoke explained, are "traditional upper-middle class families who are very focused on their children." Eighty-seven percent own homes. They represent 8% of all U.S. households and have average incomes of $75,000-$150,000. Their houses carry a mean value of $500,000. This demographic group is the most likely to sell or change homes in a year, and its members are the most likely to finish an attic or a basement. They have a high propensity to shop online. They watch the Disney channel. They are nicknamed “Upward Bound.”

And upward is where the remodeling market is headed in 2013, with forecasts ranging from a 3% to a 7% increase, nationally. Remodelers I talked with at the show said that after a disappointing summer, the phone is ringing again. As the RRI indicates, activity will vary, sometimes greatly, by city and even by Zip code, but the direction, especially for the three groups I just described, is finally clear. Things are looking up.

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