Remodeling Posts Biggest Gain In A Decade

Remodeling expenditures saw record growth in 2004, up 12.3 percent from 2003, and the National Association of Home Builders sees continued growth ahead. Americans spent $198.6 billion on remodeling projects last year according to the U.S. Census Bureau, up from $176.9 in 2003 and the largest increase in more than a decade.

“A combination of increased home sales, more owner equity and low refinance rates all contributed to the tremendous growth last year,” said Remodelors Council Chairman Don Novak, CGR, CAPS, a remodeler from Cedar Rapids, Iowa.

In addition, the National Association of Home Builders (NAHB) Remodelors Council™ forecasts continued growth throughout 2005 to $209 billion, but at a less torrid increase of 6.3 percent. Owner-occupied properties saw a major increase in remodeling spending, up to $143.4 billion in 2004 versus $119.9 billion in 2003. At the same time, spending on renter-occupied properties decreased slightly in 2004, down to $55.1 billion from $57 billion.

“Because of rising home prices, homeowners are more willing than ever to invest in their homes,” said NAHB Chief Economist Dave Seiders. “We see this as a continuing trend for several years to come.”

Rising home prices have encouraged remodeling in several ways, including:

• Remodeling has become easier to finance with the increased equity that a homeowner can tap into, either through refinancing or home equity loans.
• Homeowners may decide to remain and improve their homes when faced with sticker shock from home prices, as homes nationwide have appreciated by 15.1 percent over the last year .
• Rising prices make improvements look like better investments, as a greater percentage of the cost will be recouped in any sale.

In markets with rapidly rising prices, it is not unreasonable for the homeowner to expect to eventually recoup the full cost or more of an improvement project. The aging housing stock also contributes significantly to remodeling projects. Currently at an average of 32 years and rising, a greater need for maintenance, repairs and the opportunity for more (and more expensive) improvements will continue.