Americans rushed to renovate their homes in December, but the frenzy won’t last, say economists.
Home renovations surged in December after a year-and-a-half of declines, but the market is projected to dip in early 2020, according to economists.
Americans spent 16.26% more on maintenance and 10.85% more on remodeling in December from a year ago, according to Austin-based information company BuildFax’s report.
“Homeowners are now grappling with an increasingly competitive housing market. The housing shortage has caused prices to spike, making it even more challenging for homeowners to buy a new home. However, consumer confidence is increasing once again, which suggests homeowners will be more willing, in lieu of purchasing new homes, to embark on those pricier maintenance and remodeling projects,” said Jonathan Kanarek, managing director at BuildFax.
Consumers renovated their own homes in lieu of trading up and buying a new home because the market was too competitive in December, according to the report. The rate of Americans moving slowed to 9.8% in December, its lowest level since 1947, the report said.
“Average tenure length (how long someone stays in their home) is at a historically high level of 12 years, limiting the number of existing homes available for sale. At the same time, new construction is not keeping pace with demand for homes,” said Odeta Kushi, deputy chief economist for First American Financial Corporation, a Washington, D.C.-based real estate services provider.
Slow growth for home renovation in 2020
But Americans won’t be as keen on home renovations in 2020, according to new projections.
Repair and renovation spending is predicted to rise only 1.5% in 2020, with growth particularly slow in the first half of the year. In recent years, the average rate of renovation spending was 5% to 7% growth, according to the Joint Center for Housing Studies of Harvard University’s Leading Indicator for Remodeling Activity report, released January 16.
That report blames 2020’s slow renovation market on economic turbulence, higher construction costs and last year’s housing slowdown, which may have a lagging negative effect on the market, according to the report.
But renovations should tick up by the end of 2020 as sales activity rises. Although slow home sales activity created an environment for renovation in December, an estimated uptick in home sales later this year is expected to give home repair a boost as sellers and buyers “spruce” a home before and after a sale.
“Sales are a double edged sword,” said Abbe Will, associate project director of remodeling futures at the Joint Center for Housing Studies of Harvard University.
Sarah Paynter is a reporter at Yahoo Finance. Follow her on Twitter @sarahapaynter
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