New home sales in 2002 rose to record levels, along with sales of existing homes. Housing starts are at their highest level since 1986. That's all great news for builders, but what about the home improvement industry?

Kermit Baker, senior research fellow at Harvard University's Joint Center for Housing Studies, says that remodelers should be thrilled with the current state of the economy. "In the past, the remodeling industry has mimicked the numbers on the new construction side," he says. Both industries are driven by income growth and low mortgage rates.

The home improvement industry is also bolstered by existing home sales. Homeowners trying to sell often take on remodeling projects to improve the value of their house, and people frequently remodel right after they've bought a house. "People are looking to invest in their homes," says Baker, especially with other investment options being as weak as they are.

More predictions for a bright future for the housing market are contained in a study titled "The Housing Boom: Another 20 Years of Growth," published by Al Ehrbar, a partner in the consulting firm Stern Stewart and Company. Baker tentatively agrees with this report. However, he does caution that "we're in a unique situation now. It's hard to imagine mortgage rates being this low in the future." However, Baker adds, "the economy looks healthy over the next decade, and the fundamentals for a sound [remodeling] market look encouraging."