The housing market remains weak, but recent data show demand for home improvement goods picking up.
(left to right) Flooring Specialist Peggy Rock trained Flooring Specialist Rebecca Mezera on the vast selection at the new Hom Furniture floor and carpeting sections at the Plymouth store on 4/5/12. Despite a slow economic recovery, retailers see small but unmistakable signs of life in the sluggish home improvement market. It may not be the boom years but retailers are expanding into new categories and investing in new stores. HOM Furniture recently debuted its new floor and carpeting sections. Minnesota Tile & Studio spent over $5 million to build a 40,000 square studio. HomeGoods and Arhaus Furniture are opening new stores in the Twin Cities region.
Nervous about the economy, Tanya Dressen and her husband held off on replacing the $1,000 Pottery Barn cabana near their pool in Elk River that was ripped apart during a storm two years ago.
But after saving their money and watching expenses, the Dressens are now ready to splurge on one that's top-of-the-line. The couple is spending $15,000 on a cabana equipped with a television, mini-fridge, bar stools -- even a device that creates mist.
"We absolutely needed to do a permanent" cabana, Dressen, 40, said. "I feel better about our expenses. This is the 'new normal.' You go through a spending paralysis, then you don't. You can figure out what you can live with."
While the housing market continues to be weighed down by foreclosures and depressed home prices, consumers are warming up to the idea of jazzing up their homes. That's good news for retailers that sell home-related goods and services, which were hit hard by the recession.
Minnesota Tile & Stone just spent more than $5 million opening a state-of-the-art, 40,000-square-foot design studio in Minnetonka. And other area retailers are either adding to their home product lines or opening new locations.
"The market is still very difficult, but we are seeing some remodeling pickup," said Alan Dale, owner of Minnesota Tile & Stone. "We're on the cusp. We want to be on the front side" of this rebound.
From March 2011 to February 2012, sales of home improvement goods rose 5.3 percent compared with the previous 12-month period, according to the NPD Group. Of the 35 product categories NPD tracks in home improvement, the research firm says 83 percent reported sales gains, including more substantial items like interior lighting (up 6.1 percent), faucets (up 15.4 percent) and shower heads (up 16.3 percent).
"That's some pretty good growth," said Kevin Gilbert, NPD Group's director of home improvement.
The Joint Center for Housing Studies (JCHS) at Harvard University predicts spending on home remodeling will continue to rise throughout 2012, thanks to increased consumer confidence and a strengthening economy.
"We're beginning to see some hopeful signs in the economy, and the housing market is finally starting its slow recovery," Eric Belsky, managing director of the Joint Center, said in a statement. "That should prove helpful for home improvement spending as the year progresses."
HOM Furniture, based in Coon Rapids, recently added flooring and carpeting to its stores. Arhaus Furniture opened its first Minnesota store at the Galleria in Edina. And last month, HomeGoods debuted its new store in Maple Grove, its eighth location in the local market.
Last week, Minneapolis-based Target Corp. said sales of home goods at stores open for at least a year rose in the low single digits for March, the second consecutive month the category showed growth after struggling mightily in 2011.
The positive data represent a turnaround from just three years ago when an overheated housing market precipitated the worst recession since the Great Depression.
From 2000 to 2007, during the housing bubble, annual home improvement spending for the average U.S. household rose a whopping 39 percent to $2,950, according to JCHS. Two years later, as the market crashed, that number fell 21 percent to $2,342.
As the economy started to improve, consumers felt more comfortable doting on their houses, "doing the smaller things to make their house appear nicer," Gilbert of NPD said. "Consumers still think their homes are a good investment -- in the long run."
The Twin Cities would be at the forefront of any rebound in home remodeling. Thanks to strong household incomes, the region boasts some of the country's highest spending rates on not only home remodels, but also upscale makeovers, according to JCHS.
Ron Johansen, CEO of HOM Furniture, said its posh Gabberts chain has performed well of late. He partially attributes the growth to the resurgent stock prices, which tends to make people feel wealthier.
As it turns out, "Gabberts has been a nice investment for the company," said Johansen, who bought the chain in 2008, right before the economy tanked.
But Johansen is not ready to declare victory yet. HOM Furniture sales have been somewhat sluggish. And the recovery for the overall housing market remains painfully slow, he said.
"It's a slow race," Johansen said. "Nothing dramatic. Slow growth at best. Seems like whenever we get something going, something happens" like higher gas prices.
Still, barring any major setback, the housing market and the economy are unmistakably improving, he said.
"As long as there is no big disruption, it looks like the housing industry is recovering," Johansen said. "We should see some pretty decent years here."
Thomas Lee • 612-673-4113