Remodeling activity is going strong as the housing market continues its recovery and is expected to continue to accelerate until the fall, when the pace will likely slow, according to a new study issued by the Joint Center for Housing Studies at Harvard University.
The study found that homeowner spending on improvements reached $140.5 billion for the first quarter of this year, a four quarter moving rate of change of 10.7 percent. According to its Leading Indicator of Remodeling Activity, the center projects that second quarter spending on home improvements nationally will grow to $145.5 billion. Third-quarter growth is projected at $158.9 billion, but in the last quarter the market is expected to soften to $153.1 billion.
That means that growth for the remodeling industry will increase 13.1 percent in the second quarter, 14.5 percent in the third quarter and 9.4 percent in the last quarter when compared to the previous year.
At its peak level, in the second quarter of 2007, homeowners spent $146 billion on improvements, according to the center.
“The housing recovery has at least temporarily lost some of its momentum,” explained Eric Belsky, managing director of the joint center. “And as a result, remodeling spending is expected to follow suit and see slower growth beginning later this year.”
“Home improvement spending has already recovered a significant share of its losses from the downturn,” said Kermit Baker, director of the Remodeling Futures Program at the center. “As spending moves into the next phase, we expect to see recent double-digit growth tail off to its longer-term average in the mid-single-digit range.”
The study computes spending on remodeling for four quarters and compares it to total spending in the previous four quarters in order to measure change in remodeling activity. The data is based on the U.S. Department of Commerce information on residential improvements including remodeling, additions and major replacements made to owner-occupied properties after the original completion of the building.
It includes spending for the finishing of basements and attics, updates to kitchens and baths, improvements like pools and replacement of major systems such as water heaters, furnaces and central air conditioners. The data does not capture money spent on painting, landscaping or routine maintenance.
“We’re definitely seeing double-digit growth on the residential remodeling side,” said Dave McGuire, vice president at Andrew Roby, a general contractor and custom builder in the city and throughout North Carolina. The company has had more inquiries this quarter than in its history.
The projects that Andrew Roby undertakes on behalf of clients run the gamut, from small handy man projects to the building of custom homes, a sector of business that has grown tremendously, according to McGuire. Most of the demand has been in Myers Park, SouthPark, Dilworth, Eastover, Ballantyne, and the Pointe at Lake Norman.
McGuire points to the health of Charlotte’s economy for boosting the remodeling business. The banks and hospitals that employ many of Andrew Roby’s clients are prospering, giving homeowners more disposable income, which they reinvest in their homes. Demographic changes and a stream of newcomers to the city are also helping sustain general contracting.
Despite Harvard Joint Center’s prediction of a slowing market at year’s end, McGuire doesn’t see any slowing in Charlotte business. “We’re very bullish on the economy here,” he said. The company, in fact, has ambitious expansion plans across all its divisions including commercial, residential, handy-man services and electrical contracting.