Although home remodeling was down about 6 percent in late 2006, American homeowner spending on remodeling projects is expected to grow 44 percent by 2015, according to a new forecast that Harvard researchers presented last week at the International Builders Show.
In 2006, Americans spent more than $260 billion to improve and repair their homes. Top remodeling choices were kitchens and bathrooms, adding rooms, replacing windows and doors, and putting on exterior siding and roofs.
“The years 2000 to 2005 were probably the best five years ever in the home improvement industry,” said Kermit Baker, a senior researcher with Harvard’s Joint Center for Housing Studies (JCHS).
As dollars spent on home fix-up projects more than doubled since the mid-1990s, the nation’s remodeling contractors grew from just over 400,000 in 1997 to 530,000.
Rapidly rising residential values encouraged homeowners to tap into the equity in their property to pay for costly improvements. In Miami’s home price boom of recent years, remodeling permit volumes were up almost 40 percent in 2005. In Dallas, where home values rose only slightly, remodeling grew just 1.7 percent in 2005.
But now home appreciation has slowed or is even negative in many parts of the country and fewer homeowners are borrowing to take equity out of their homes — a top source of funds for remodeling.
“Home improvements quite often are made by owners who are about to sell their home or recently bought homes,” said Gopal Ahluwalia, staff vice president of research for the National Association of Home Builders. “From 2001 to 2005, over 32 million new existing homes sold.
Ahluwalia added that about two-thirds of the remodeling expenditures are by people who live in houses that the value is $250,000 or more.
Harvard’s studies predict that remodeling will account for almost 50 percent of U.S. residential building by 2015. A major reason is the large inventory of older homes.
“The big decades of homebuilding were in the 1950s, 1960s and 1970s,” said William Apgar, a Harvard lecturer and senior scholar at the JCHS. “Those ’70s homes are now over 25 years old and in need of a bit of a retrofit.”
Source: Dallas Morning News