Household Mobility Remains Stalled

American households have become less mobile in the past few years. While 30 years ago, the typical household moved once every six years, the mobility rate was around 18%, currently the average has risen to one move every 10 years.

In fact, mobility has declined whether the households are renters or own their home. Renter mobility is higher, simply because a large proportion of renters are young households, such as students, who tend to move more frequently. Renter mobility has fallen from a little over 35% back in the late Eighties, to last year’s rate of just under 22%.

Homeowner mobility had also fallen from 9.5% in 1988 to its lowest point of 4.7% by 2012. But in contrast to renters, over the last five years, homeowners have become more mobile, with their rate increasing to 5.5% last year.

Mobility among homeowners fell precipitously during the 2007-09 economic recession, when millions of households lost their homes to foreclosure.

There are several reasons underlying the declining trend in mobility. The most obvious is that the U.S. population is getting older, and older households have a lower likelihood of moving. Younger households, especially those around college age, move virtually every year, bringing the overall average up. The difference in mobility by age is illustrated in the chart below.

What does this mean for the K&B design and remodeling market? Lower mobility rates tend to depress home sales, and consequently the remodeling market. Households who stay put rather than move tend to be less likely to engage in major remodeling projects. One of the triggers driving households to remodel is the move to another house.

 

Sales of Building Materials Stabilize

Sales of building materials have remained relatively stable for a year now. Sales grew at an average of nearly 7 percent annually (6.9%) between January 2014 and August 2017. But over the last 12 months, as seen in the chart below, they’ve grown at less than half that rate – 3.3% for the year ended in August.

Sales of building materials are lagging behind overall retail sales. For the first eight months of the year, total retail sales are 5.7% higher than they were in the same period of 2017. In contrast, sales of building materials are 3.9% higher.

Other key categories are listed in the chart below, led by sales at gas stations, up 15.6% from  last year. Of course, gas-station sales are driven by gasoline prices, which rose 20% in the year ended in August. In fact, since sales are rising less than prices, consumers are either driving less or gas-station profits are lower.

Mortgage Rates Rise Again

And, as expected, mortgage rates have continued their gradual rise. Last week’s increase of six basis points (0.06%) is the largest in a month, bringing the 30-year fixed rate back to the level it was a little over a month ago.

Although the weekly increases are relatively small, they continue to price out a number of potential home buyers from the housing market.

Manuel Gutierrez, Consulting Economist to NKBA

Explanation of NKBA’s Economic Indicators Dashboard

Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.

Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.

Single-Family Starts.  This is the number of single-family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.

Existing-Home Sales. These data are issued monthly by the National Association of Realtors and capture the number of existing homes that were sold in the previous month.

High-End Home Sales. This series are sales of new homes priced at $500,000 and higher. The data are released quarterly by the U.S. Department of Commerce and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.

Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.

Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.

Building-Materials Sales. These data, released monthly by the Department of Commerce, capture total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.

Appliance-Store Sales.This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as home centers.

We hope you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.