The U.S. housing market is a disaster. The government was able to create an artificial bump in buying and curtail a steady downtrend in housing prices by offering a first-time homebuyers a tax credit two years ago, but with that credit now gone, buying has dried up and home prices are falling once again. Many observers refer to this as a potential double-dip, but I have to wonder whether we ever really rebounded in the first place.
With so many aspects of housing in the dumps and the majority of homebuilders reporting weaker-than-anticipated earnings results, it may come as a shock that home remodels are on the rise.
Source: National Association of Home Builders.
According to the National Association of Home Builders, the seasonally adjusted Remodeling Market Index, or RMI, has hit its highest level since late 2006. The RMI measures current and future expectations for remodeling and demonstrates homeowners' recent willingness to stay put in their homes. Whether this is due to underwater mortgages or tight credit markets is irrelevant. What's important is that remodels are on the rise, and there could be a hidden opportunity in there for investors.
General remodels and flooring
Without getting into the specific segments of remodeling, Home Depot
Despite taking a nosedive two weeks ago, Lumber Liquidators
Furniture is a fickle sector in any environment, but it becomes significantly more attractive with the knowledge that home remodels are up. La-Z-Boy
Another name to consider is Williams-Sonoma
Even the worst situations offer an opportunity for bargain hunters. As long as credit markets continue to stay tight and nearly one-quarter of U.S. homeowners remain underwater on their mortgages, it's likely that the number of remodels will continue to tick higher.
What companies do you think will benefit from an uptick in home remodels? Tell the community by posting in the comments section below, and consider adding Home Depot, Lowe's, Lumber Liquidators, La-Z-Boy, and Williams-Sonoma to your Foolish watchlist to keep up on the latest in the home-improvement sector.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong The Motley Fool owns shares of Lumber Liquidators. Motley Fool newsletter services have recommended buying shares of Lumber Liquidators, Lowe's, and Home Depot, as well as writing covered calls in Lowe's. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that hammers home the facts better than Bob Vila.