Remodelers See Green in Slumping Home Sales
PHILADELPHIA — A growing number of homeowners who considered selling are deciding to stay put — at least until the number of unsold houses drops enough to make it a seller’s market again.<br /><br />This isn’t good news for listing agents, but remodeling contractors, architects and suppliers are gearing up to handle what they assume will be an increase in people looking to make improvements that will add value when the time to sell does come.<br /><br />”Sellers who must move because of job transfers or other reasons have no choice but to deal as best they can in market conditions that present them real challenges, but remodeling can be a viable alternative for many others,” said Bruce Hahn, president of the American Homeowners Association. “For homeowners who want to move up to a nicer home in their own community, remodeling can be a cost-effective way.”<br /><br />Yet while they assume that the dollar amount spent on remodeling will continue to grow, industry experts don’t expect the market to become as frenzied as it was between 2000 and 2005, when home equity financed major projects and contractors were booked months in advance.<br /><br />Through the second quarter of 2006, homeowners’ spending on remodeling grew slowly. According to the Remodeling Activity Indicator devised by Harvard University’s Joint Center for Housing Studies, homeowners spent about $155 billion on home improvements and repairs over the last four quarters, only 2.7 percent more than in the previous four quarters.<br /><br />”Homeowners are deferring major home-improvement projects in the context of softening house markets,” said Nicolas P. Retsinas, the center’s director. “Further, rising interest rates reduce access to home-equity loans that often finance home improvements.”<br />Kermit Baker, chief economist of the American Institute of Architects, said remodeling contractors have reported a slight decline in hours worked by employees and more modest growth in payrolls.<br /><br />”This points to remodeling following home building into a period of slower growth in the months ahead,” Baker said.<br /><br />Still, $155 billion is not small change.<br /><br />Homeowners’ equity, $11 trillion of it, is continuing to feed the remodeling market, according to Vince Butler, chair of the Remodelors Council of the National Association of Home Builders. It simply costs a little more to tap into that equity.<br /><br /><strong>Fred Glick, President of USLoans Mortgage in Philadelphia</strong>, said that when homeowners next refinance their mortgages to tap into equity, the smaller increases in home values today probably will mean less money is available for such projects.<br />That said, larger projects are still in vogue, according to Hahn. A popular option is the “pop-top,” adding an entire second floor to a ranch-style house, effectively doubling the space.<br />Many upgrades — of dated kitchens or baths, for example — can increase the resale value of a home by an amount equal to the remodeling cost.<br /><br />The American Institute of Architects says that the remodeling market remains strong in spite of the slowing sales market.