A Quick Dive into Pools
By Rob Jafek | Boomerang Capital Partners
Which state has the most pools per person? You might guess Florida and you’d be right about the greatest number of pools, but Arizona has the most per person, and when you’re hot, that may be what matters most. And, just to rub it in, if we need a tiebreaker we can choose the average pool size, where Arizona’s are much larger. (Pools may be smaller in Florida because in Arizona we don’t need to fence the whole thing to keep the alligators out). So, if your home doesn’t have a pool – should it? And why does this topic catch our eye? Yes, probably because it’s hot. But also, because things are changing.
Talk to people with pools and you will likely hear one of two extremes: love it or hate it, there really is not much indifference. And while your local pool installer may tell you the water is fine and you should jump right in, POOLCORP, the world’s largest wholesale distributor of swimming pools and related products, had a very different take on their most recent earnings release and discussion, stating: “We now believe that new pool units could be down 15% to 20% in 2024, and remodeling activity for 2024 may be down as much as 15% compared to our previous estimate of flat to down 10% compared to 2023.” This means that in the entire nation, just 60,000 residential in-ground pools are expected to be constructed this year, which is almost ½ of what was built in 2021 and not too far above the 54,000 that were constructed in the Great Recession year of 2009, the year following the spectacular nationwide housing bust.
Why? There are a few reasons, but the first and most obvious is the expense. Pools are getting more expensive to build and maintain. The average build cost was $74,000 in 2023 vs $43,000 in 2019. This is especially relevant in the face of affordability being an issue with any marginal cost that can be avoided, especially among lower-priced homes. Since maintenance costs also matter, a pool can actually decrease the value of a low-priced home as it adds extra monthly costs for the homeowner. Of course, in the luxury market, the reverse is true. For homes in the $700,000-$1,000,000 price range, the affordability issues of pool maintenance costs become negligible, and the pool then adds to the price of a home.
What is the return on investment for putting in a pool? With the investment of $74,000 to build a pool, how much does the house price go up? Here we have some bad news, and then some worse news. Most realtors say the premium that a pool adds to the value of a home is between 6-8%, so with the price of an average home near $400,000 we would expect a home with a pool to sell for an additional $24,000 to $32,000; so not enough to cover the price of the install. The worst news is that the premium in Phoenix is lower than in other locations, with Redfin estimating it at $11,590.71, the lowest of the 19 metro areas they looked at. Putting out $74,000 (plus maintenance expenses) to get back $11,590.71 when you sell your home doesn’t make much financial sense.
Adding a pool to an existing home, in terms of a return on investment, seems to be an easy call with the evidence firmly in favor of it being a poor investment, especially for a less expensive home. The good news in Phoenix is that your neighbor will likely let you swim in theirs.