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Market Trends

American Express study reveals a strong economy is driving home owners to spend on improvements.

Fueled by a strong economy and stable interest rates, more consumers are taking hammer and paint brush in hand to re-decorate and remodel their homes. According to the American Express Retail Index, 39 percent of U.S. home owners are undertaking home projects this year, up eight percent from last year. The average budget for these projects, estimated at $2,929, also is up by 10 percent. The American Express Retail Index, which monitors consumer spending trends in retail and is based on a random national poll of more than 1,000 home owners, found consumers are putting savings, tax refunds and company bonuses toward their project budgets and using home improvement loans, home refinancing and credit cards to make up the difference. This year, home owners plan a number of projects including: • interior decorating and refurnishing (59 percent) • renovation and remodeling (32 percent) • landscaping (29 percent) • gardening (27 percent) • mandatory maintenance (24 percent) • exterior decorating work (22 percent) • expansion (14 percent) • restoration (13 percent) "For three years in a row, the American Express Retail Index has been consistent with industry reports showing year-over-year growth for home improvement/home furnishing retailers," said Emelie Smith, vice president, Retail Marketing Group, American Express Travel Related Services Co., Inc. (TRS). "Thanks to the strong economy, home owners will continue to put time, energy and money into their homes to turn them into a place that reflects their lifestyles and personal tastes." Several industry reports, in fact, project a booming business and steady growth for the home improvement category from now through the year 2002. In 1997, for example, the home improvement market reached $101.7 billion, a number that could climb to $106 billion in 1998, and $114.6 billion by the year 2000, according to the Home Improvement Research Institute.   Home furnishings and decorating stores should expect to see the most growth this year.   The Dream House Based on improvement projects planned throughout the home this year, today's consumers are enhancing the exterior and interior of their homes in a variety of ways. For example, the American Express Retail Index found 18 percent of those undertaking a home project will refurnish at least one room in the house, with home owners shifting attention away from the living room, last year's top room to get a face-lift, and putting more focus on the bedroom, which was cited by 27 percent of home owners. The living room came second, at 17 percent. In the kitchen, home owners had a number of style and design preferences that were both practical and functional. For instance, 43 percent of kitchen remodelers said they would install new cabinets, with the majority choosing wood (90 percent) over any other material. In addition, 61 percent will add new countertops, preferring laminate and ceramic tile over solid surfacing and granite surfaces. WHAT TYPES OF HOME IMPROVEMENTS ARE THEY MAKING? According to the American Express Retail Index, 39% of Americans are undertaking home improvements this year, up 8% from last year. This year, interior decorating has replaced renovation, and remodeling as the No.1 form of home improvement. Here's what consumers are doing•: INTERIOR DECORATING & REFURNISHING 59% RENOVATION/REMODELING 32% LANDSCAPING 29% GARDENING 27% MANDATORY MAINTENANCE 24% EXTERIOR DECORATING 22% EXPANSION 14% RESTORATION 13% •Respondents could choose more than one answer • Source: American Express Retail Index Close to half (45 percent) will install new appliances choosing white or almond over other, more trendier colors such as stainless steel and black. Other popular kitchen additions include a breakfast table, stools, work center or island and baker's rack. Throughout the rest of the house, the majority of do-it-yourselfers are following either a neutral (60 percent) or blue/green (46 percent) color scheme; installing wall-to-wall carpeting (24 percent) and adding a variety of lighting accents (25 percent) to a modern contemporary design theme (31 percent). An additional 19 percent will add or convert a room into either a home office or home entertainment room. DIYs Drive Trends Getting most of their ideas from magazines and newspapers (52 percent), as well as their own concepts (26 percent), two-thirds (63 percent) of those making improvements to their homes are do-it-yourselfers (DIYs). This year, however, they are getting more help from contractors (30 percent, up four percent from 1997) and family and friends (25 percent, up six percent from 1997). REFURNISHING PLANS THROUGHOUT THE HOME According to the American Express Retail Index, 51% of consumers cite changes in personal taste as their main reason for undertaking a home project. The following looks at the most popular rooms getting a face-lift: BEDROOM 27% LIVING ROOM 17% KITCHEN 16% HOME OFFICE 13% DINING ROOM 11% DEN/HOME THEATER 8% •Respondents could choose more than one answer • Source: American Express Retail Index Personal taste continues to drive home improvement projects by home owners with half (51 percent) citing changes in personal taste as a reason for undertaking a project. Other reasons given include: • regular maintenance and repairs (28 percent) • increase home's resale value (nine percent) • need more room (eight percent). Consumers Shop in Droves In keeping with consumers' focus on interior decorating, home furnishings and decorating stores should expect to see the most growth this year. Compared with last year's study, home furnishings and decorating stores showed the most dramatic increase (up to 20 percent) with regard to where consumers will shop for home items and supplies. This year, 31 percent of home owners say they will visit a home furnishings/decorating store, a department store (22 percent, up from 12 percent in 1997), or a specialty store (12 percent). In addition, more shoppers expect to find knowledgeable salespeople at the home retailers they visit. When asked the top reasons for choosing a home improvement/ home furnishings retailer, consumers cited fair prices (66 percent), selection (48 percent), quality merchandise (39 percent) and helpful salespeople (29 percent, up six percent from last year). THE DREAM HOME: MEN VS. WOMEN According to the American Express Retail Index, men and women differ in their color, style and design preferences when it comes to home improvement and decorating. Here's where men and women agree and disagree on today's popular home trends: MEN   WOMEN 22% Preferred Style: Modern 40% 60% Preferred Color: Neutral 60% 57% Idea Source: Mags/Newspapers 47% 12% Preferred Flooring: Carpeting 12% 23% Use of Accent Lighting 27% •Respondents could choose more than one answer Source: American Express Retail Index Financing the Projects According the American Express Retail Index, 70 percent of home owners say they plan for their home improvement projects in advance, indicating they have an opportunity to weigh a number of options when it comes to how to finance the project. With 40 percent spending $2,000 or more on improving their homes, most home owners rely on a combination of financial resources to pay for contractors, new furniture and materials. While 70 percent dip into their savings, more than half (57 percent) supplement their budgets with a recent windfall such as tax refund or company bonus (31 percent), credit or charge card (12 percent), home improvement loan (nine percent) or through refinancing a mortgage (five percent). American Express Travel Related Services Co., Inc., is a wholly-owned subsidiary of the American Express Co.-a diversified worldwide travel and financial services company founded in 1850. It is a leader in charge and credit cards, Travelers Cheques, travel, financial planning, investment products, insurance and international banking.