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Home Renovations Surging in Popularity

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Home Renovations

To say that the housing market is starting to recover is an understatement! Last year, sales of existing homes rose to their highest level in five years. New home sales, new construction, and remodeling retailers all reported growth in 2012 as well. Luckily, economists say we can expect more of the same this year! A recent report from Bloomberg estimates nationwide sales of existing homes may rise more than 7% in 2013. If that happens, it would be the highest percentage increase since 2007. The same report indicates that home prices may gain 3.3% in 2013, after increasing 4.5% in 2012. And thanks to record-low mortgage rates, new home construction and sales are also on the rise. Earlier this month, the U.S. Census Bureau announced that construction began on 616,000 single-family residences in December. Builders also broke ground on 330,000 multiple-family units before the year came to a close. Because of their increased workload, builder confidence is at its highest level in over six years, and most of the major metropolitan areas across the country are reporting an increase in the number of new homes that have sold.

But low interest rates aren't just affecting sellers and buyers. Many homeowners who have no plans to sell are also taking advantage of the situation. Many are refinancing their mortgages and are opting to take out some additional money in the process to tackle remodeling projects. And that’s where this remodeling resurgence comes in! Market analysts at the Joint Center for Housing Studies at Harvard University say the boost in sales of painting and construction supplies started last year when interest rates dipped below 4%, and they predict we could see more remodeling projects in the year to come.

"Through the first three quarters of 2012, investment in the residential sector was responsible for one out of every six dollars added to our GDP," said Eric Belsky, the Managing Director of the Joint Center, in a statement. "Moving forward, home improvement spending is expected to make an even larger contribution to GDP growth."  That's great news for companies that sell products needed for home improvements. For example, paint supplier Sherwin Williams reports higher consumer demand for their products resulted in a 4.8% increase in sales during the third quarter of 2012, boosting their stock by 74% in the past 12 months.

It's much of the same at home improvement mega-chains Home Depot and Lowe's. Both of those companies have seen a nearly 50% increase to their shares during the housing recovery (Home Depot’s increase is 48%; Lowe’s is 44%). Fourth quarter numbers from 2012 for retailers have not been released yet, but economists predict that Sherwin Williams, Home Depot, Lowe's, and their competitors will be equally-pleased with those figures.

What’s the reason for the surge? As more homeowners opt to refinance their home loans (and take advantage of rates that they never thought were possible), their monthly mortgage payments are lower than ever before. It seems consumers are spending that leftover income on home improvements, and the retailers who assist them with those projects are expecting that trend to continue in the months to come. That's why Lowe's just announced it will be hiring thousands of new seasonal and permanent employees. Home Depot is expected to make a similar announcement once their fourth quarter numbers from 2012 are released on February 26th. So regardless of their reason – to make upgrades that they can enjoy themselves, or to remodel before putting their house on the market – more homeowners are spending their hard-earned money on home renovations!
 


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