Harvard Joint Center expects unabated growth in home remodeling into next year
By D. E. Rosen | November 22, 2016
The growth in home renovations and repairs is expected to continue unabated into next year, according to a new report released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
Some borrowers may be taking advantage of growing equity in their homes to finally finance their dream remodeling projects. Spending for home renovations will continue to grow, reaching a record $327 billion, according to the center’s Leading Indicator of Remodeling Activity (LIRA).
Last July, the LIRA – which gauges the health of the home improvement and repair markets in the U.S. – anticipated that growth in improvement and repair spending would reach 8 percent at the start of 2017. That’s compared to a historical average of 4.9 percent.
Always at the top of the list of remodeling jobs, kitchen makeovers should account for a good share of the spending.
Harvard expects growth to moderate later in 2017 due to recent slower expansion of single-family homebuilding and existing-home sales.
“Homeowner remodeling activity continues to be encouraged by rising home values and tightening for-sale inventories in many markets across the country,” states Chris Herbert, managing director of the Joint Center.
“Even as remodeling growth trends back down, levels of spending are expected to reach new highs by the third quarter of next year,” says Abbe Will, a research analyst in the Remodeling Futures Program.
Baby Boomers hoping to age in place in their current homes during retirement – along with the desire of homeowners for more amenities and additional living space – are helping drive the market.
Cash-out lending recorded its ninth consecutive quarterly increase by both loan count and sum-of-equity draw in the second quarter of 2016, according to Black Knight Financial Service’s Mortgage Monitor.
"Today's cash-out refinance borrowers continue to present a relatively low risk profile, historically speaking," says Black Knight Data & Analytics Executive Vice President Ben Graboske.
The average credit score among Q2 2016 cash-out refinance borrowers – 748 – is 67 points higher than the low point recorded in Q3 2006, Graboske says. It’s also nearly 60 points higher than the average credit score among cash-out refinance borrowers from 2005 to 2007, he says.