With home values returning to levels from before the recession and many going higher, people again have equity in their homes. That's enabling them to take out second mortgages. Much of that money is going into remodeling projects of the houses they plan to stay in. Kitchens, baths, and even garages are seeing upgrades. Some estimates are for up to $260 billion in upgrades over the next year.
38 million borrowers now have at least 20 percent equity in their homes, according to Black Knight Financial Services. Confidence is also key. When people feel better about their home's value, they are more apt to invest in it. Most people have no intention of moving to another home unless they have to for employment, health, or other reasons. Instead, they want to improve the castle they currently own and live in.
Service requests on HomeAdvisor for multiroom remodels are up 67 percent from a year ago. Remodeling and home improvements are now expected to exceed new home construction in the next few years. Still, as home sales pickup those can be expected to fuel the remodeling market. This will happen both in the preparation to sell along with new owners wanting to make their own changes.
No matter the reason, growth in remodeling is a boon to retailers like Home Depot, Lowes, and Sherwin Williams. Of course, contractors are highly benefiting as well. At least one-quarter of remodeling firms across all sectors report seeing more clients taking on multiple projects at the same time, according to another report from Houzz, also an online remodeling services firm.
Growth in home improvement and repair expenditures will reach 8 percent by the start of 2017, according to a new report from Harvard's Joint Center for Housing. That is far beyond its 4.9 percent historical average. "By the middle of next year, the national remodeling market should be very close to a full recovery from its worst downturn on record," said Abbe Will, research analyst in the remodeling futures program at the Joint Center."
"By the middle of next year, the national remodeling market should be very close to a full recovery from its worst downturn on record," said Abbe Will, research analyst in the remodeling futures program at the Joint Center. "Annual spending is set to reach $321 billion by then, which after adjusting for inflation is just shy of the previous peak set in 2006 before the housing crash."
Increased home equity is certainly playing a large role, as are near-record low mortgage rates, which are enticing owners to refinance and potentially pull cash out.
Remodeling is always a good idea. The best idea is to do it well before you sell a home. Seldom do you recover the complete cost at the time of selling. Your better off enjoying the upgrades yourself before passing them on to a buyer.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.