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In the latest fallout from the mortgage industry calamity (of its’ own making), Home Depot, agreed to a buyout offer for its commercial supply unit (HD Supply) by a consortium that includes private equity partner firm, Bain Capital (Bain was co-founded, incidentally, by Republican presidential candidate Mitt Romney, who left the firm in 2001.). The price is $8.5 billion. That’s down from the $10.3 billion price agreed to on June 19^th by the parties. The price drop was, of course, partially attributed to the recent mortgage industry problems and to recent difficulties faced by the nation’s home builders.

It seems that Home Depot Supply could use the latest building industry downturn as an opportunity to consolidate its builder business. In any industry downturn, firms are looking to economize and increase efficiency wherever possible so they can ride out the bumps ahead. With their massive capital and buying power, HDS is in a perfect position to help builders do just that. Now is the perfect time to consolidate their foothold on the building industry. With a solid distribution and supply network, they are a position to gain market share by forging new and expanding existing partnerships with the nation’s home builders. Time will tell if they do, in fact, take this opportunity to help home builders out in their hour of need, and, in so doing, give themselves a leg up as well.

The building industry suppliers that weather the storm will be in a great position to emerge from the current market problems with a greater market share and bolstered account list. For suppliers, now may be the time to focus even more intensely on remodeling oriented contractors, as the need for repairs and remodels grows as homeowners keep and improve their homes, rather than selling and moving up. Many will be dissuaded from selling due to poor residential real estate prices and lower demand because of a smaller pool of qualified creditors. If home owners still have substantial equity in their homes, a possibility if they’ve owned their homes for more than 5 – 7 years, remodeling may be a better choice than braving a stagnant sellers market.

Buyers, on the other hand, will be rewarded with a myriad of choices. Homes will be had for a relative song in many markets, as the list of foreclosures and deeply discounted properties grows. With cash from the savings they receive, they can jump in to making any improvements in their newly acquired properties. This may not be enough to offset the number of homeowners that don’t make pre-sale improvements before selling their homes, or the lack of new buyers that typically make improvements soon after acquiring their new homes. According to the remodeling industry study published by the Harvard University Joint Center for Housing Studies, there will be a slowdown in the remodeling industry, but it promises to much briefer than in the building industry as a whole.

A sector of the housing market that may still hold promise is the extreme upper end of the market. While not completely recession proof, the very rich will always have money to spend, and many spend it on homes and remodels. It’s not uncommon for wealthy homeowners to plunk down $3 – 5 million on a new home, only to immediately tear into the place for, as they see it, essential improvements. After all, if you can afford homes in this price range, you’re paying for location first and the structure second. The golf course or waterfront lot is the real prize in the deal, and that fabulous custom home is just so much clay to mold into the home of their dreams.

I’ve personally experienced wealthy heirs remodel exquisite, mid-century lakefront estates, and spend millions doing so, only to resell them because they couldn’t bear certain aspects of the place when they were finished. Life’s tough all over, I suppose, but that’s an insight into the minds of some in that socio-economic strata. When investing, the more insight, the better.

The Harvard study found that, while the number of new home builder has experienced a consolidation over the last 10 years or so, the number of remodeling contractors has actually swelled in the last 5 years by almost 25%. Remodel contractors in the Pacific Northwest and the East coast have experienced especially strong growth.

One emerging trend in home architecture is the resurgence of mid-century modern style homes. These homes are those built in the post WWII time frame until the early 1960’s. The trend began emerging a few years ago in remodels and new homes in Sun Belt states and has begun to spread to East Coast, and mid-west areas as well.These homes are characterized by architectural features such as “floating” elements, pocket doors, cantilevered roofs and decks, post and beam elements, and cathedral ceilings. If you’re targeting homes as remodel candidates with potential for strong appreciation, this is one style that could show strong demand in the future.

As always trends are cyclical, so the duration of this trend is unknown, but it appears to be gaining strength. There have begun to be magazines published that focus on this architectural style. New magazines are a good predictor of future demand and emerging trends (not just in this area, but of any trend). Watch for the increasing number and thickness of these publications, as the number of features and advertisers grows. =