Caulk Replaces Show Kitchens at Home Depot, Lowe's
Dyane Townley craves new kitchen counters for her home in Greensboro, North Carolina. Husband Jeff, a Honda Aircraft Co. engineer, wants a bigger back deck. With money tight, the Townleys are putting those dreams on hold.
Many Americans, having splurged on show kitchens, spa bathrooms and surround-sound media rooms during the housing boom, are doing the same. Spending on home renovation for the 12 months ending Sept. 30 will fall 25 percent to $107.7 billion compared with the same period in 2007, according to Harvard University’s Joint Center for Housing Studies.
“There are still consumers putting in new kitchens,” Robert Niblock, the chairman and chief executive officer of Lowe’s, said in a telephone interview. “But they’re doing it because they’re going to be in their homes longer. That’s the change from the go-go days.”
Sales of new homes last month fell 12 percent from June, the lowest level on record, the Commerce Department said yesterday. Sales of existing homes plunged by a record 27 percent in July, according to the National Association of Realtors.
The highest unemployment rate since 1983 also is making Americans cautious about fixing up their homes, said Niblock, 47. Many homeowners are painting, caulking and re-carpeting, he said, and many are doing it themselves.
The Townleys, still trying to sell their previous house in Savannah, Georgia, are typical. They re-carpeted and repainted much of the inside of their blue, four-bedroom Greensboro home.
“Anything we can do ourselves, we do because it’s cheaper,” said Dyane, 34. “We aren’t splurging on anything right now.”
Home Depot rose 5 cents to $28.38 at 4 p.m. in New York Stock Exchange composite trading. The shares have slipped 1.9 percent this year. Lowe’s declined 6 cents to $20.65. The Mooresville, North Carolina-based company’s shares have fallen 12 percent in 2010.
The two home-improvement chains are trying to counter a drop in big-ticket transactions, such as kitchen cabinets, that is depressing how much shoppers spend each visit. At Home Depot during the second quarter, sales of $50 or less increased 2.4 percent while purchases of $900 and higher sank 4.9 percent.
“If you have a leaky faucet, you buy the washer rather than a replacement faucet,” Carol Tome, Home Depot’s chief financial officer, said in a telephone interview.
Atlanta-based Home Depot surveyed 3,000 customers in May and found half planned to paint this year while four in 10 intend to caulk. The results prompted a new marketing campaign. Its slogan, “Lowering the Cost of Operating Your Home,” reflects an emphasis on such “head snappers” as the “Vanity Insanity” promotion starring bathroom vanities selling for as little as $49, Chief Marketing Officer Frank Bifulco said in an interview.
Home Depot is holding more DIY classes for customers online and in its stores. The retailer said attendance at “do-it- herself” classes for women climbed 20 percent in June, a sign homeowners are tackling projects they once paid others to do.
Millionaire homeowners are choosier about upgrades, too, said Susan Marocco, an interior designer in Bedford, New York, whose clients in Westchester County and Fairfield County, Connecticut spend up to $250,000 on a kitchen.
“There was much more of an open checkbook, much more free spending to do the whole house,” Marocco said. “Now there’s a lot more thought about where the spending is going.”
Marocco expects to do seven or eight kitchen renovations this year after completing twice that many in 2008. She has been working with a couple in Bedford, New York, on a renovation and addition that was delayed in 2008. The couple kept their fridge and dishwasher and reused the granite countertops.
“They were very mindful of how they spent their money,” said Marocco, declining to identify the client.
Wall Streeters are less likely to tear down houses and rebuild “something two or three times bigger,” said Michael Murphy, director of new project development at Murphy Brothers Contracting in Mamaroneck, New York. Clients are building houses a third smaller and spending more on insulation, heating and cooling systems and solar panels to save money later, he said.
The slump in demand has unleashed “a feeding frenzy” among builders, and the price of custom homes selling for $1 million or more has dropped 10 percent from 2007, Murphy said.
Americans will “tiptoe back,” said Steve Spiwak, a home improvement analyst at the consulting firm Kantar Retail in Columbus, Ohio. Big-ticket purchases, including appliances, may not revive for a year or more, he said.
In the meantime, consumers are looking for deals and willing to bargain hard. The Townleys say they paid about $4,000 for new carpet, extracting a $1,400 discount from Lowe’s after playing the retailer off against Home Depot.
“I like to dicker,” said Dyane Townley.
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