Confident consumers to increase spending on remodeling projects
Wednesday, March 14, 2018
Growing confidence in the strength of the U.S. economy and personal financial situations has consumers spending more. One of the areas where they are putting their money is into their homes.
Whether for projects big or small, homeowners say they plan to spend more this year on repairs and improvements.
Earlier forecasts had assumed expenditures on home improvement and remodeling would decrease somewhat in 2018 following several years of strong growth. Those forecasts recently have been revised to reflect changes in household income and consumer attitudes.
The Conference Board reports that its Consumer Confidence Index (CCI) for February reached its highest level since November 2000. Similarly, the University of Michigan’s Survey of Consumers for February reached its second highest level since 2004.
Both institutions cited the belief that the economy will continue to grow in the months ahead and optimism regarding job opportunities and security, wage growth, and improved household income as factors bolstering consumer confidence.
These factors, along with concerns about anticipated increases in mortgage rates, rising home values, and an unprecedented number of homeowners unwilling to move from their current homes, will increase demand for remodeling and renovation services, say experts.
Metrostudy states that its Residential Remodeling Activity Index (RRI) for the fourth quarter of 2017 hit an all-time high, ending the year up nearly 5 percent from 2016. It has revised its previous forecast for 2018 from 4.7 percent to a 5.2 percent year-over-year increase. Moreover, it expects that the industry will continue to reach new highs through the year 2020.
Likewise, in January, the Center for Housing Studies at Harvard University had revised its Leading Indicator of Remodeling Activity (LIRA) upward, to 7.5 percent year-over-year, stating, "2018 could post the strongest gains for home remodeling in more than a decade." Its previous forecast had indicated growth might go as high as 7.7 percent in the third quarter of 2018.
Results of a recent survey conducted by lending service Lightstream confirms that, indeed, homeowners are disposed to spend more money on improving their homes in the coming year.
The study found 58 percent of participating homeowners were planning to spend more this year, with 45 percent (an all-time high, according to Lightstream) saying they anticipated spending $5,000 or more. The percentage of those who were planning "a big spend" ($35,000 or more) doubled from last year’s survey.
Many of the participants were contemplating repairs, improvements and upgrades to the exterior or outdoor areas of their homes. Still, nearly one-third (31 percent) were planning a bathroom remodel, and one-fourth (26 percent) a kitchen remodel. Overall, 14 percent of respondents were looking to make improvements or modifications for aging in place, including 11 percent of millennials (ages 18 to 34) and 10 percent of Gen Xers (ages 35 to 44).
More than one-third of the respondents (36 percent) said they planned to hire a professional to do the project for them, while slightly less than a third (30 percent) said they would hire a professional to assist with part of the project but would do some of the work themselves. Nearly two-thirds of respondents (65 percent) said they would do at least some of the work themselves, with millennials most likely (70 percent) to do so.
In addition to the factors mentioned earlier, the Lightstream study found that increased household income due to the recent tax reform legislation prompted about one-fifth (18 percent) of respondents to consider spending more on home improvements.
Almost two-thirds (62 percent) of homeowners planned to use savings, at least in part, to pay for their projects. With home values rising, the proportion of respondents who planned to use a home improvement loan to finance their projects was up 29 percent from last year.
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