Homeowners are beginning to ease back on their spending on home improvements. A study from Harvard University's Joint Center for Housing Studies found that growth in remodeling spending is expected to drop relative to 2018 levels in 29 of 49 metro areas surveyed. Market Watch reports the dip in spending could be the result of a cooling housing market, declining home sales, and a recent rise in interest rates.
“We’ve been calling for 2019 to see a slowdown in remodeling,” Robert Dietz, the chief economist at the National Association of Home Builders, told MarketWatch.
The decline in home sales this year and the rise in interest rates last year could be fueling the dip in remodeling spending growth, Dietz said. Interest rates have dropped during 2019, but homeowners may just now be feeling the “indirect and lagged” effects of last year’s rate increases, Dietz said.
“People feel like they have less money,” Dietz told MarketWatch. With less money, people are less likely to invest in home improvements.
“People either want to make the home fit their needs when they buy it or make some improvements before they try to sell,” Danielle Hale, the chief economist at Realtor.com, told MarketWatch.
The housing market got off to a slow start in 2019, with a 7% drop in new home sales in January. Existing home sale fell for the second straight month in April and the National Association of Realtors says it expect sales to stagnate this year.
However, despite potential short-term slowdowns in remodeling spending, many experts project remodeling spending will pick up again in the long run. People are moving less, which will likely lead to more money spent in the remodeling market segment. An aging population and aging housing stock also will likely fuel the aging-in-place remodeling market segment. A recent study from the U.S. Census Bureau found there will 78 million people over the age of 65 in the U.S. by 2035.
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