Great Untapped Fix-Up Market

Writing in "Building Supply News," Norman P. Mason, formerly president of the National Retail Lumber Dealers Association and now chairman of the Construction and Civic Department Committee of the United States Chamber of Commerce, discusses in practical fashion the present possibilities offered the retail lumber industry by the repair and fix-up market. His remarks follow:

Keeping up to date a stock of 43,000,000 non-farm family dwellings is the challenge now facing the construction industry. The possibilities are exciting. Perhaps a whole nerv phase of the construction industry may develop because of the opportunities it presents. A critical study discloses some statistical facts.

This study shows that the actual size of the fix-up market is generally much understated. It shows how current activity of this kind might be as much as 5O percent more than the official estimates. It shows also how even this simplified figure can be enlarged by more alert attention to the possibilities of repair and remodeling work and by the vigorous application of better methods for getting the job done.

In short, we believe that the residential fix-up business may now be running over 6f billions of dollars and that another one or two billions could be added to it. Such a total would make this activity more important than any other category of private construction activity except ner,v residential building itself.

This figure (an estimated $6.6 billion), large as it is, does not on the whole represent the results of active promotion. A certain amount of fix-up work is more or less automatic. A leaking roof or a cracked pipe has to be repaired; a broken-down heating plant has to be replaced if the house is to remain habitable. Other remodeling work takes place because owners seek ways to increase their comfort, or to improve their income if the property is rented. But in most cases the initiative has come from the owner, rather than from the industry.

But, even if all the existing homes were put in a minimum state of good repair, a large market would still be left untouched. People can be sold the actual needed repairs; but beyond this there is a tremendous market for making homes more comfortable, more attractive and easier to work in. For instance, the kitchen and the laundry offer numerous opportunities for modernization. And ah,vays there is the chance of freshening the look of things with new paint, wall paper, floor coverings, and draperies, even though it would be physically possible to make the old do a while longer.

The need for more space, however, outdoes all the other incentives for remodeling. For nearly 2O years rve have been building houses smaller and smaller, while since the end of. World War II the number of children has been steadily increasing. Only in the past year or two have we reached the point where there is a slight trend in the opposite direction. The little houses have become too cramped. Extra bedrooms are needed, and extra bathrooms, more play space, ampler living and cooking facilities. N{ost of this demand will have to be taken care of by expanding and rearranging existing houses. To assume that a billion dollars a year above current expenditures could go into this kind of rvork alone is not to strain credibiiity.

As a rough calculation will show, no one need fear that greater stimulation of repair and maintenance rvill harm the new house market. We have capacity to produce new houses at an average rate of about one and a quarter million a year. If we assume nerv families to be formed at as lou' an averag'e rate as 650,000 a year, and that about 100,000 units are removecl each year because of disaster or replacement of other kinds of building, we have a basic requirement of approximately 750,000 new units a year. This would leave of the 1.25 million total some 500,000 units annually to replace existing old l-rouses. It is easy to see that rvith this possible rate of replacement-ald 'ivith the 43,000,000 houses now on hand-each must be made to last from 80 to 90 years. It is pretty obvious from this that the older houses rvill not interfere with the new house market.

There is. l-rou'ever, more to it than mere non-interference u'ith the nerv house market. Fix-up can be a positive help to the sale of new houses by making existing houses also easier to sell. Most ne.iv houses are not sold to new families but to families that have been established for some time and that often are moving from an already-owned house. Ability to make the move usually depends upon making a satisfactory sale of the older house. It takes no argument to demonstrate that a house in good repair is more salable than one in shoddy condition.

A difficulty encountered in the remodeling market is the disadvantage it faces, compared rvith new construction, in the financing terms available to it. For very small jobs the FHA system of insured loans for repair and modernization has proved helpful; but its cost is high for work of any size. The cost of uninsured consumer financing is usually even higher. When the loan is of sufficient size to warrant mortgage security (which generally is the case when the remodeling is done in connection with a home purchase), the initial payment requirement is ordinarily larger and the amortization much shorter than with new construction.

The equalization of mortgage terms for new and wellmaintained existing houses might be considered as one means for stimulating fix-up work. Helpful also is the suggestion for the wider use of the "open-end" mortgage, which would permit a householder to borrow additional sums for improving his property under an already existing mortgage agreement.

Because the demand for new housing during the next few years may be somer.vhat less than we have recently experienced, there is greater urgency for putting the remodeling business on a firm footing. Here is one area in which industry need have no fear of a slackening demand. Its only problem is to develop quickly the technical and financial methods for satisfying the demand.