The nature of the housing sector usually facilitates a simultaneous rise or fall in both home sales and remodeling efforts. However, current market conditions have permitted a steady increase in remodeling projects over home sales. The recent inclination to remodel may be attributed to the recent influx of equity back into the housing sector. On a national level, more owners have been awarded the opportunity to reinvest in their property. As a result, homeowners are expected to spend more on remodeling their homes in the upcoming year than at the height of the previous housing boom.
It was not until 2009 that remodeling, otherwise known as rehabbing, became a popular trend. Those familiar with the market may notice that these efforts took place before prices and sales began to recover. In fact, the recovery may be attributed to the increase in rehab projects. Investors, in particular, purchased millions of distressed properties and turned them into desirable living arrangements. Remodeling efforts by investors facilitated the circulation of countless homes that would otherwise still be distressed and untouched.
Thanks to remodeling efforts, the housing sector recovery has gained significant traction and home sales are bouncing back. The equity generated by the recovery has allowed many owners to rehab their own properties; be it for resale or personal fulfillment.
“In the near term, homeowner spending on improvements is expected to see its strongest growth since the height of the housing boom,” said Kermit Baker, director of the Remodeling Futures Program at the Harvard Joint Center for Housing Studies.
According to a recent report issued by BuildFax, a building permit-tracking company, September was the beneficiary of a 14 percent increase in remodeling projects compared to the same time last year. However, while the amount of projects increased, the types of projects varied. More homeowners are focusing their attention on larger projects than ever before. Those under $10,000 have dropped off significantly. This is likely the result of more owners wanting to renovate and investors in cheaper markets diminishing.
It is also important to note that consumer confidence is rising significantly. People are, therefore, more inclined to spend again. Perhaps the largest beneficiaries of this trend are retail and supply stores experiencing a jump in business. Home Depot, the No. 1 home improvement retailer, witnessed a “better-than-expected” quarterly earnings and raised their fiscal-year outlook.
Spending on home improvement projects rose 9 percent in 2012 — the first increase since 2007, according to a study by the Joint Center for Housing Studies at Harvard University. That number has since jumped to 14 percent.
“With the U.S. economy and housing market now recovering, investment in the nation’s housing inventory is also picking up,” according to the JCH report. “Lenders and new owners are rehabilitating millions of foreclosed properties. Older homeowners are retrofitting their homes to accommodate their future needs… And with the huge echo-boom population moving into the home buying market over the coming decade, the remodeling industry can look to an even more promising future.”