You can thank lower interest rates, rising housing prices or short memories, but homeowners are once again tapping home equity to finance ambitious remodeling projects. Spending on home improvement projects is now back to levels not seen since 2006.
Higher home prices have given people cash back and they are putting that cash to work in more—and bigger—remodeling projects.
Growth in home improvement and repair expenditures will reach 8 percent by the start of 2017, according to a new report from Harvard’s Joint Center for Housing. That is far beyond its 4.9 percent historical average.
“By the middle of next year, the national remodeling market should be very close to a full recovery from its worst downturn on record,” said Abbe Will, research analyst in the remodeling futures program at the Joint Center. “Annual spending is set to reach $321 billion by then, which after adjusting for inflation is just shy of the previous peak set in 2006 before the housing crash.”
Increased home equity is certainly playing a large role, as are near-record low mortgage rates, which are enticing owners to refinance and potentially pull cash out. In the first quarter of this year alone, homeowners gained a collective $260 billion in additional home equity, thanks to higher home values, and with that increase, 38 million borrowers now have at least 20 percent equity in their homes, according to Black Knight Financial Services.
Confidence is also key. When people feel better about their home’s value, they are more apt to invest in it. And given the low rate of return of savings accounts, homeowners as choosing “nesting as investing.” In this economic climate, investing in your own home can make a lot of sense.
Kitchen and bath remodels lead the way, but less glamorous projects like beefing up insulation can also yield large returns. More complex multi-room remodels are also on the rise. Don’t forget to spec your projects using Krynkle to make sure you spend the correct amount based on prices in your neighborhood.
Nesting is not the only thing driving home remodeling. As home sales pick up, they fuel fresh finishings as well.
“As more homeowners are enticed to list their properties, we can expect increased remodeling and repair in preparation for sales, coupled with spending by the new owners who are looking to customize their homes to fit their needs,” said Chris Herbert, managing director of Harvard’s Joint Center.
Krynkle is a transformative way to manage—and build equity in—your most important asset: your home. It calculates the right amount to spend on remodeling projects, and stores your important project documents and images for you. Learn more at Krynkle.com.
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