With mortgage rates rising, more homeowners are opting to remodel instead of move.
After several years of booming sales and soaring prices, the U.S. housing industry is starting to cool down.
But one residential sector is bucking the trend.
Home remodeling is expected to grow over the next two years as more of the nation’s homeowners elect to fix up rather than sell off the roofs over their heads.
Residential remodelers spent more than $300 billion nationwide in 2018. And industry forecasts call for an increase in home redos and repairs this year.
Housing economists are predicting a 4 percent to 5 percent increase in home remodeling this year, while nationwide preowned home sales are expected to drop about 3 percent.
“As houses get older and affordability becomes an issue, remodeling the existing house is a more reasonable option,” said Danushka Nanayakkara, a top forecaster and analyst for the National Association of Home Builders.
She said that almost 40 percent of U.S. homes are 48 years old or older.
Traditionally, most home remodeling work is done to improve a home before a sale or to upgrade one after it’s purchased. But with homeowners staying put longer, more of the remodeling jobs are by owners who want to step up the quality of their house.
“If you have equity in your home, because there are so few homes for sale and the cost of building has skyrocketed, a lot of the times it makes more sense to remodel the home you are in,” said Joanne Theunissen, a top officer in the homebuilding industry’s remodeling council. “We are seeing a lot more whole-house remodels and large additions to homes.”
A report by Harvard University’s Joint Center for Housing Studies estimated that total dollar value of home remodeling projects in the Dallas-Fort Worth area was up 11 percent in 2018. That was one of the highest growth rates among the more than two dozen major U.S. metro areas Harvard researchers studied.
“The last two years were really good years for us, and 2019 is looking good for us, too,” said Botond Laszlo, who heads the Dallas chapter of the National Association of the Remodeling Industry. “The selling in the real estate market has slowed down.
“That’s typically helping the remodeling business.”Botond Laszlo, who heads the Dallas chapter of the National Association of the Remodeling Industry, owns Marvelous Home Makeovers.
Along with cosmetic upgrades and necessary repairs, older homeowners are spending remodeling dollars to allow them to stay in their homes as they age. Remodelers — like all contractors — are struggling with higher construction costs and a shortage of labor.
“The past three years, we’ve seen an increase in materials from 10 percent up to 37 percent, depending on the finishes,” Theunissen said. “Labor costs and availability is a major challenge for us.
“We saw a lot of our trades leave the industry during the recession, and they chose to retire or enter a different field.”
The higher mortgage rates that have made it tougher for buyers to afford new homes could bring remodelers more business.
Housing analysts predict many homeowners will be reluctant to trade current lower-interest mortgages for a higher-priced home purchase loan.
“You have a large number of people entrenched with very low mortgage rates that don’t want to give up those mortgage rates,” said David Berson, chief economist with Nationwide Mutual Insurance.