Home Improvements on the Rise
August 8, 2013
An increase in home sales and the emergence of low financing costs is leading to a rise in home construction, according to several studies. The result is an increase in home improvements and home remodeling, which has been notably down from their norm in recent years.
In 2007, the home improvement industry brought in $328 billion, according to the Joint Center for Housing Studies at Harvard University. That number has since been on a downward turn. In 2011, spending in the same areas clocked in at $275 billion. However, although data is still being collected for 2012, it appears that an 11% increase has occurred.
This is of course good news for the construction markets and for the economy at large. Increases in spending show increased confidence in the economy, greater job security, and less of a desire to plan ahead out of fear.
Projects such as refinished or remodeled basements, new kitchens, and new additions to homes are now on the rise. “When the market isn’t doing well, people learn to deal with what they have,” said one housing expert. “Rather than aim bigger, they make do. Now, we’re seeing people dreaming up new spaces for their homes, and they’re actually going for it.”
However, not all homemakers are having an easy time getting financing for such projects. Homeowners with negative equity, in other words, homeowners who owe more on their homes than the home is worth, will have a very difficult time getting financing for a home improvement project. Since equity is necessary for a bank to fund such a project, a total lack thereof makes it nearly impossible to get the financing needed.
Studies show that those who have equity will spend 22% more on home improvements than those without, and therefore, it’s those who have equity that are fueling this recent uptick in home remodeling. The core demographic of families that are taking on such projects tend to fall within the middle to upper-middle class bracket. These families are shifting their focus from moving to bigger homes and are instead making their current homes into their “dream homes”. This movement – colloquially called “aging-in-place”, is a major force behind the push toward home improvement projects.
Though it is in part economic fears that are keeping people in place, the comfort associated with deciding to stay in one place is what is motivating those same individuals to remodel their homes. Discretionary projects such as basement remodels, kitchen remodels, and creating the much written about “man cave” in the garage or basement are perks to financial stability. Since families are not stretching themselves as thin as they may have when the economic future was not as unruly, they are able the stretch their legs a bit by way of home improvements.