Thursday, February 16, 2012 | Edited by Daniel Moores
||Home Remodelers Betting on a Rebound
Residential contractors are hoping that tight-fisted consumers will decide they need a new bathroom.
Or maybe it's time for those old kitchen counters to go.
Perhaps it would be better to add another bedroom than move?
After three years of slumping business, builders anticipate that the home remodeling and improvement sector will pick up in 2012.
"We have been in a downturn and a weak market for a really long time," said Paul Emrath, a researcher with the National Association of Home Builders. "But we are starting to edge up to the tipping point.
"The phones are ringing, people are calling and making appointments," Emrath said last week at the association's annual meeting in Florida. "But the next challenge is to turn those over into actual jobs."
In 2011, U.S. residential remodeling added up to an estimated $279 billion, about the same as in 2010 but down almost 15 percent from 2007.
And new-home starts have fallen more than 70 percent around the country since the market peak in 2005.
"All things considered, remodeling has held up well in this cycle," said Kermit Baker, a senior fellow at Harvard University's Joint Center for Housing Studies.
"We think we are going to see better numbers coming out of the industry as we move into the second half of this year and into 2013," he said.
The National Association of Home Builders is forecasting an almost 9 percent increase in remodeling this year and more than an 11 percent jump nationwide in 2013.
"We are still not going to be back to where we were at the peak," the NAHB's Emrath said. "It's difficult to get financing.
"And a related problem is the decline in house prices -- people don’t have as much equity," he said. "People may not want to remodel when they are seeing house prices going down."
More than half of the home remodeling projects last year cost in excess of $25,000.
And total home remodeling and improvement expenditures now add up to more dollars than new-home construction, according to the builders association.
Remodeling accounts for close to 70 percent of U.S. residential construction expenditures.
The biggest share of home improvement spending, roughly 20 percent, goes for exterior repairs or upgrades. But kitchen and bathroom jobs are a close second at 19 percent of remodeling work.
Hold the glitz
Some of the glitzy fix-up jobs of years past are on hold, regardless of what they show on home decorating television shows.
"The growth we saw in the industry in the early and middle part of the last decade was driven by a lot of upper-end discretionary projects," Baker said. "A lot of that is not going to come back.
"There is a lot of concern out there that the housing market has changed and people are making different decisions."
Until nationwide home values improve, homeowners will be more conservative with their remodeling, Baker predicts.
If pre-owned home sales pick up, that will help the industry, he said.
"The time of purchase -- particularly if you are buying an older home -- is the most common time for undertaking a home improvement project," Baker said.
Previously foreclosed homes needing repairs will benefit remodelers as new owners get those properties in shape, he said.
Lenders also are spending money to improve distressed houses. Mortgage company Fannie Mae spent more than $600 million fixing up foreclosed properties last year, Baker said.
"We see a lot of potential fixing up these distressed properties to repair them for sale," he said. "There are almost 2 million homes nationally that are likely to go into foreclosure sometime soon.
"There are over 2 million homes nationally that are already in the foreclosure process," he said. "And there are about 400,000 homes that have come through the foreclosure process and are owned by banks."
(Source: The Dallas Morning News, 02/11/12)
||Personal Loans Make a Comeback
Personal loans fell out of favor during the financial crisis. But they are starting to make a comeback at lenders such as Wells Fargo, Discover Financial Services and TD Bank.
Some borrowers are using personal loans for big-ticket items, such as paying for a wedding or home repairs, or to help children get settled after college. At a time when many people are seeking to pare their debt, a personal loan -- which isn't secured by borrower assets -- can also help borrowers take control of existing debt and pay it off over a fixed term.
The increased interest in personal loans comes as consumers across all income levels are looking to get more disciplined, says Todd Denbo, a senior vice president at Wells Fargo. "They want a known monthly payment and a known light at the end of the tunnel," he says.
Robert Barabani, a 30-year old accountant in Elmwood Park, N.J., is consolidating $15,000 of credit-card debt used to pay for home improvements into a personal loan from Wells Fargo. "We decided to get the charges off higher-interest credit cards and get a longer-term loan with a lower interest rate," he says.
Lenders, meanwhile, are looking for ways to grow. Wells Fargo saw double-digit gains in personal lending last year, says Mr. Denbo, who declined to provide specific figures.
Originations of personal loans fell sharply in 2008 and 2009, but have begun to edge up, increasing 4.5% in the first 11 months of 2011 compared with the same period a year earlier, according to the credit bureau Equifax.
Some banks are ramping up their marketing. U.S. consumers received 424.8 million offers in the mail for personal loans in 2011, up from 290.5 million in 2010, according to research firm Mintel Comperemedia.
TD Bank, a unit of Canada's Toronto-Dominion Bank, saw a 25% increase in applications for unsecured personal loans in November and December, says TD Bank Executive Vice President Michael Copley.
Renewed interest in personal loans comes as falling home values and tighter lending standards have made tapping home equity, once a common source of financing, less attractive and, in many cases, impossible.
Just 15% of homeowners who refinanced their mortgage in the fourth quarter increased their loan balance by at least 5%, the lowest level in 26 years, according to Freddie Mac. The number of new home-equity line of credit originations has fallen every year since 2006, according to Equifax.
Such loans aren't without risk, of course. The biggest: It can be tempting to pile on new charges after consolidating existing debt.
"If you're someone who relies on credit cards as a supplemental source of income, getting into a situation like this is always dangerous," says Abigail Ford, a manager at Consumer Credit Counseling Service of San Francisco.
Mark Cole, chief operating officer of CredAbility, an Atlanta-based credit counselor, advises borrowers to close existing lines of credit after taking out a personal loan. Otherwise, "all you are doing is really digging a deeper hole," he says.
A borrower with good credit can expect to pay 8.49% to 14.49% for a personal loan with a five-year term, according to loan tracker Informa Research. That compares well with rates as high as 24.9% on some credit cards, but can be higher than rates on mortgages and auto loans that are secured by collateral.
Some lenders offer even sweeter deals. American Eagle Federal Credit Union, based in East Hartford, Conn., this winter issued 12-month "Holiday Helper" loans with a 3.75% rate. This month, it will offer a debt-consolidation special with a rate as low as 6.5% for a loan with a 36-month term. Borrowers can cut their rate by an additional 0.25 percentage point if they arrange to have payments automatically deducted from their credit-union checking account.
Discover began offering unsecured personal loans about six years ago, but recently stepped up direct mail offers as part of its effort to diversify beyond credit cards. About two-thirds of borrowers also have a Discover credit card, but the company has started making more loans to new customers. It will lend up to $25,000. The loans are currently being offered by invitation only.
"Our ideal customer is someone who has a little bit of debt," says Discover Vice President Nick Brown. They are "actively trying to manage their finances and they are looking for a product that offers simplicity and financial benefits."
TD Bank offers loans from $5,000 to $50,000 for up to 60 months, with fixed rates of 6% to 10%. It targets borrowers with credit scores in the mid-700s, Mr. Copley says. Standards vary by lender, but borrowers with good credit generally have scores of 720 or higher.
Wells Fargo, meanwhile, will lend up to $100,000, but says $8,000 to $10,000 loans are most common. Rates range from 9% to 21%, depending on credit score, income, intended use of funds, relationship with the bank and total borrowings.
The bottom line, says Mike Sullivan, director of education for Take Charge America, a Phoenix-based credit-counseling agency: "If by consolidating debt you can pay it off faster or pay it off cheaply, thereby increasing your net worth over a five-year period, it's probably a good idea."
(Source: The Wall Street Journal, 02/13/12)
||Survey: Consumers Plan to Travel More in 2012
Good news for the travel sector: According to Travelocity's annual "Traveler Confidence Report," a majority of consumers (53 percent) plan to travel more in 2012 than they did in 2011 despite a lack of confidence in the economy.
This data represents an 18 percent increase versus 2011. Of those who plan to travel more this year, about two-thirds plan to increase their travel budget in 2012, while one-third will travel more without spending more.
"The travel industry should be encouraged by our findings and take this as a vote of confidence," said Carl Sparks, president and CEO, Travelocity Global. "While increases in spending are being driven by higher prices, travelers are taking more vacations and trips that are longer and farther away this year compared to last."
The 2012 survey saw a six percent year-over-year increase in people who plan to increase their travel budget, and only slightly more than half of respondents have a predetermined travel budget this year. Nearly 50 percent of respondents plan to save money by increasing their comparison shopping, being more flexible on dates and booking further in advance.
About 70 percent of respondents intend to book vacation packages combining flight and hotel or book hotels via flash sales, while 40 percent are likely to consider booking an "opaque hotel" through services such as Travelocity's Top Secret Hotels.
Seventy-six percent of respondents plan to spend the same on hotels or increase their hotel spending to account for rising room rates, taking more trips and staying longer. Respondents were unlikely, however, to spend more on hotel services and amenities, such as maid service, newspapers or personal check-in.
More than one-third of respondents planned to go on a "staycation" by booking a hotel near home for a short getaway, a similar percentage to last year.
Seventy-nine percent of respondents anticipate spending the same or more on flights this year. Those who plan to increase flight spending from last year (47 percent) are doing so either due to rising airfares or because they plan on traveling differently, such as by taking more trips or traveling further away. The only ancillary service travelers are significantly likely to pay for (52 percent) is checking one bag.
As in last year's survey, the majority are unlikely to pay for other ancillary services like advanced seating assignment, extra legroom, a second bag or early boarding.
(Source: Travel Agent Central, 02/10/12)
Daily Sales Tip: Home Remodelers Are Radio Listeners
A recent study conducted by The Media Audit reveals that radio, billboards, and the Internet are among the top three media used the most by consumers planning to remodel their homes in the next year. According to the survey, adults looking to remodel their residences are 20% more likely to be heavy radio listeners, spending three or more hours per day listening.
The study also shows that Birmingham, Alabama and Albany-Schenectady-Troy, New York rank as the top markets for adults who plan to remodel their homes. Among adults living in Birmingham, 26.5% plan to remodel their homes within the next 12 months, compared to 19.2% for the general U.S. population. Among adults in Albany, 25.7% expect to remodel in the next year.
Following the top two metro areas are Buffalo, New York, with 24.7% of the local population planning a remodeling project, Columbus, Ohio, also at 24.7%, Philadelphia, Pennsylvania (24.6%), Peoria, Illinois (24.6%), Kansas City, Missouri (24.5%), Rochester, New York (24.2%), Charleston, South Carolina (22.8%) and San Antonio, Texas (22.8%).
Source: The Media Audit FYI, 01/31/12