Harvard study anticipates double-digit growth in home remodeling spending in 2013
Stacey Makely | Improvement Center Columnist | August 22, 2012
Are you finally ready to build your dream kitchen? You may not be alone.
Remodeling activity is positioned for continued growth this year into next, according to the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The Joint Center's Leading Indicator of Remodeling Activity (LIRA) says that spending on home improvements could hit double-digit growth in early 2013.
Homeowners spent an estimated $114.8 billion on home improvements in the first quarter of this year, according to LIRA. That number dipped slightly to $113.6 billion in the second quarter but is expected to bounce back to $114.8 billion and then up to $120.7 billion in the third and fourth quarters, respectively. Spending for home upgrades is expected to jump to $128.9 billion in the first quarter of 2013, according to LIRA's estimates.
The latest release of the Residential Remodeling Index (RRI) by Hanley Wood agrees is equally optimistic. According to Hanley Wood's executive director, Jonathan Smoke, 2013 has the potential to be the best year for remodeling activity since 2006.
"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," Kermit Baker, director of the Remodeling Futures Program at the Joint Center, said. "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. "
The Joint Center has said that the housing market crash of recent years makes homeowners more inclined to stay put and take on remodeling and other home improvement projects rather than move. Energy-efficiency upgrades are likely choices.
Kitchen and bathroom remodeling -- most popular improvements
Kitchens and baths remain the most popular remodeling jobs among homeowners, according to the National Association of Home Builders (NAHB). A recent NAHB survey found that common remodeling projects have increased over the last two years, with kitchen and bathroom renovations up 17 percent from two years ago. Among the remodelers surveyed, 78 percent said bathrooms were their "most common" renovation and 69 percent, kitchen renos, according to the NAHB.
The survey revealed other common home improvements, in order of popularity, included replacement windows and doors, entire home remodels, room add-ons and general handy services.
"Homeowners are repurposing spaces and making more efficient use of their home's square footage," said NAHB Remodelers Chairman George "Geep" Moore Jr., who is also owner and president of Moore-Built Construction & Restoration Inc. in Elm Grove, La. "Whether it be young families or couples aging in their homes, people want to let their house adapt with their needs as they change over time."
Customers said repairing and replacing old components and the desire to upgrade amenities were among their top reasons for hiring a contractor. In fact, more than 60 percent of remodelers said they're seeing more demand for repairs and replacements, and more than half are seeing customers who want upgraded amenities, according to the survey.
Getting the most bang for your buck
The National Association of Realtors agrees that kitchen and baths consistently rate among to best places to spend your remodeling dollars -- and get them back out. But it's important not to neglect the rest of the house in the process, they say. Sometimes a fresh coat of paint can do the trick for making your interior look beautiful.
Don't forget about the outside of your house, either. If you're looking at home improvement projects that will help with the resale value of your home, a new garage door, fiber cement siding or a new deck can garner more than 70 percent return on investment, according to Remodeling Magazine's 2011-2012 Cost vs. Value Report. Turning an attic into a bedroom, installing a new entry door and, of course, a new kitchen, also top the list of improvements cited that provide excellent value when it comes time to sell your house.
Whether homeowners are looking to increase their home's value or just make those much-needed upgrades that improve their day-to-day lives, they'll be doing more of them in the coming months.
"Warm weather in the first quarter temporarily bumped up remodeling activity in many areas," said Eric S. Belsky, managing director of the Joint Center for housing studies at Harvard University. "By the end of the year, however, positive market fundamentals are expected to kick in, moving the industry out of this ebb and flow period and into a new growth phase."