A recent fit of virtuous (if misguided) housecleaning ended up costing me $600, but what I learned in the process could provide you with a chance to get in on a secondary play of a recovering sector.
It started when I decided to clean under the refrigerator for the first time in quite a while. I took my time sweeping up the accumulated gunk, vacuuming the coils and disinfecting the unit from top to bottom.
But when I plugged the fridge back in, the outside began warming up and the inside stopped being cold. Some 24 hours and a half-dozen Web searches later, I realized my mistake.
To get under the unit, I tilted it and rested it on a chair while I cleaned. I’m not strong enough to hold the fridge up with one hand and sweep with the other, but tilting it had burned out the compressor, which moves the refrigerant through all those now-clean metal coils. Whoops.
I decided it was time to buy a new fridge. Shopping for a new unit took me to several home improvement stores — and to my surprise, they were all jammed. Appliances, tools, paint and lumber — every section was hopping, and much more than I’d seen in years. Had everyone just broken something at the same time?
No. What I stumbled on was a boom in the home improvement industry resulting from a recovering housing market.
In June, the monthly sentiment index from the National Association of Home Builders (NAHB), known as the Housing Market Index (HMI), moved into the positive for the first time since April 2006. The HMI jumped 8 points to 52 (anything greater than 50 indicates positive sales conditions). NAHB Chief Economist David Rowe has predicted housing starts will top 1 million this year for the first time since 2007.
In addition, investors flipped more than 136,000 single-family homes during the first half of this year, according to research firm RealtyTrac’s mid-year flipping report. That’s 19% higher than the pace last year and 74% percent higher than in 2011 — and it’s on pace to exceed the nearly 233,000 houses flipped in 2006 at the height of the housing bubble.
What do these numbers mean? The current housing boom isn’t just the work of homeowners — the pros are back. And what do the pros do? Spend money to freshen up a property and then resell it.
The Home Improvement Research Institute (HIRI) sees the same trend. HIRI expects total home improvement sales to increase 4.3% this year, to $287.3 billion, and another 5.7% next year.
Next, I looked at several home improvement stocks to see whether those spending numbers were translating into improved financial results.