While the remodeling industry as a whole is thriving, business in certain parts of the country has slowed somewhat in the past year or two. The good news, however, is that although national trends are somewhat difficult to predict, all signs point to that lull being temporary.
For example, in the first quarter of 2003, the National Association of Realtors' Housing Affordability Index hit its highest level in 30 years, rising to 144. This means the average American household has 144% of the yearly income necessary to purchase a home at the median existing-home price.
Housing remains affordable despite relatively high home prices because of plummeting interest rates, which in recent months have sunk to the lowest levels on record. According to Kermit Baker, senior research fellow at the Joint Center for Housing Studies at Harvard University, this bodes well for the home improvement industry. Historically, says Baker, high affordability has generated a lot of activity in the housing market, and "households that are moving are also remodeling."
Additionally, the low interest rates create refinancing opportunities. Indeed, more and more people are refinancing their homes, and a significant number who do take out more money than they need to pay off their old mortgages. Baker says that a study done by the Federal Reserve Board late last year found that 35% of that "extra" money was used to finance home improvement projects. "Low interest rates are good for remodeling," he says.