Remodeling and home improvement spending posted a strong rebound last year, but the rebound was short-lived, a new report says. Home owners remodeling projects and expenditures are back on the decline this year as housing market conditions and fading tax incentives cause more home owners to delay projects once again.
The primary driver of home remodeling expenditures is the pace of single-family existing home sales, writes Robert Dietz, an economist with the National Association of Home Builders, in an article at U.S. News & World Report. Between the summer of 2013 and March of this year, existing-home sales fell, Dietz says, despite a recent rebound. As such, Dietz says the remodeling market has seen declines in the annual pace of improvement spending since December 2013.
“Existing home owners are most likely to improve a home prior to placing the home on the market, and new home owners find the best time to make substantial changes to a home is immediately after purchase,” Dietz notes.
The pace of remodeling in August was down more than 10 percent year-over-year, according to U.S. Census Bureau data.
Dietz points not only to the stall in home sales but also to the expiration at the end of 2013 of a set of federal energy-efficiency tax credits for the slowdown in remodeling expenditures. The tax credits helped home owners to offset the cost of replacing older windows, hot water tanks, and appliances with new energy-efficient models.
“Despite these economic and policy headwinds, the prospects for the remodeling sector appear more positive for 2015,” Dietz notes. An index of professional remodeler sentiment shows a gain in confidence, particularly as the existing single-family sales market improves. The National Association of REALTORS® is forecasting a 7.7 percent growth in existing sales in 2015.
“Underlying these market improvements is the fact that our nation’s housing stock continues to age, and aging homes require upgrading and modification,” Dietz notes. The median age of owner-occupied homes was 35 years old, according to the 2011 American Housing Survey (in the 1985 AHS survey, the median age was 23).
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Source: US News & World Report 10/20/2014