More and more Americans are now feeling better about the value of their properties that they seem more prone to add to that value. Because of the increasing interest to add value to homes, growth in annual spending on home remodeling projects is expected to surge from 2.4% in the 2nd quarter of 2015 to 6.8% in the 2nd quarter of 2016. These numbers are results of Harvard’s Joint Center for Housing Studies.
According to the managing director of the Joint Center, Chris Herbert, home improvement continues to benefit from the last year’s upswing in housing market conditions that include new constructions, price gains and sales. Because homeowners see the strengthening market conditions they are encouraged to invest more in discretionary home improvements like kitchen and bathroom remodeling and room additions. Aside from remodeling projects, homeowners have also begun to show interest in replacing worn out components like roofing and sidings.
According to Black Knight Financial Services, cash out refinancing this summer is up by 68% from the 2nd quarter of this year to a year ago. This is considered as the highest level in 5 years where most of the money is going back into the homes in the form of renovations. In fact, contractors in Washington D.C. are booked through the winter.
People are more prone to remodeling their homes now because of low interest rates. However, while industry confidence remains strong for the rest of 2015, the challenge to growth is shortage of skilled labor. Beneficiaries of this boom will undoubtedly be material retailers and manufacturers.
According to John Burns Real Estate Consulting, spending in repairs and remodeling is expected to grow to about $300.5 billion in 2016. The bulk of remodeling investments will come from discretionary projects like kitchens and bathrooms. Home price appreciation is expected at 4.2% next year due to these small and big remodeling projects.
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