On the House: Home improvement is picking up

Posted: August 05, 2012

I've been receiving an increasing number of e-mails from homeowners indicating that they are about to embark on some sort of major home-improvement project - adding or renovating a bathroom, redoing a dated kitchen, or changing windows in a push for greater energy efficiency.

The e-mails appear to agree with observations of the nation's remodelers, according to data from the National Association of Home Builders.

Bathroom remodeling was cited by 78 percent of members polled about the work they were doing, with window and door replacement and property repairs following in priority.

It's a sign of a couple of things. First, that homeowners who might have been considering a move to something bigger, smaller or newer are still concerned enough about the housing market and the economy in general to stay put and fix up.

Fewer and fewer of the e-mails I've been getting lately are from homeowners asking about renovation projects that guarantee complete return on their investment when they sell.

There are no guarantees. If your roof leaks and you replace it so you can sell your house, it means you won't be offered less by buyers who were less likely to walk away in the first place because you replaced the roof.

The builders association's members survey listing property repairs as a major endeavor shows that a lot of sellers now get this basic market fact: Buyers aren't going to even look at a house unless everything is in working order and they don't have to do massive repairs just to move in.

Second, and less certain, is that an upswing in home improvement is a sign that credit might be easing up enough to allow homeowners to tap into a little bit of home equity to pay up front for the work.

Fixed 30-year interest rates have remained below 4 percent for all but one week this year. Data from the Mortgage Bankers Association consistently show that most of the mortgage activity week after week is refinancing.

Although overall we have much less equity in our houses now than six years ago, not every homeowner has suffered equally in the real estate downturn. Unless other economic factors interfere, the prudent among us save regularly for rainy days and the leaky roofs they bring.

Accompanying the anecdotal evidence are data showing that home-improvement spending may experience double-digit growth by the first quarter of next year.

The Leading Indicator of Remodeling Activity, calculated by the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard, defines double-digit as 12.2 percent, which will follow a projected 5.9 percent in fourth quarter 2012 and 2.3 percent in the third period of this year.

The first quarter of 2012 experienced a 3.7 percent increase in spending, according to Census Bureau data. It followed a 2.2 percent increase in the fourth quarter of 2011. The previous 10 quarters showed single-digit declines or flatness.

"Home-improvement activity has been bouncing around the bottom of this cycle for almost three years now, waiting for the industry to get some traction," said Kermit Baker, director of the Remodeling Futures Program. "Now, the combination of low financing costs, stronger consumer confidence, improving home sales, and the perception that home prices have stabilized in most markets across the country are encouraging owners to start working on the list of home-improvement projects they have been putting off."

Eric Belsky, managing director of the Joint Center for Housing Studies, said that by year's end "positive market fundamentals are expected to kick in, moving the industry out of this ebb-and-flow period and into a new growth phase."


Contact Alan J. Heavens at 215-854-2472, aheavens@phillynews.comor@alheavens at Twitter.

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