Reductions in the amount spent on high-end home improvement projects continue to hinder remodeling activity according to Harvard’s Joint Center for Housing Studies. For 2009, the Leading Indicator of Remodeling Activity (LIRA) points to homeowner improvement spending declining around 12 percent.
The LIRA measures and projects only a portion of the U.S. home improvement market, however. It no longer includes spending on maintenance and repair because the U.S. Census Department stopped collecting that data for its C-50 report last year. Spending on rental and vacation property, likewise, is not reflected by the LIRA.
“The weak housing market and the national economic recession continue to take their toll on remodeling,” explains Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “It looks increasingly unlikely that this industry will recover until consumers have more confidence in the housing market.”
“Lower financing costs are beginning to stabilize the downturn in existing-home sales, as they also are reducing the cost of financing a home improvement project” notes Kermit Baker, director of the Remodeling Futures Program of the Joint Center. “However, they have not been enough to offset rising unemployment and falling consumer confidence and encourage homeowners to undertake major home improvement projects,” cautions Baker. |
Home Buyers Returning
Thanks to record low mortgage rates and declining home prices, 55 million families — or half of all U.S. households — can afford today’s $200,000 median-priced new home, according to figures released by the National Association of Home Builders (NAHB).
“That’s an increase of 17 million households from conditions just two years ago and the best housing affordability number we have seen in years,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.
Based on data from the U.S. Census Bureau comparing home prices, mortgage rates and minimum income needed to purchase a median-priced home in February 2007 and February 2009, a typical family today can purchase a house with $20,000 less in household income and save nearly $500 per month on their principal, interest, taxes and insurance. The number of households that can afford to purchase a home today is 55.4 million, compared with 38.4 million two years ago, according to figures compiled by NAHB.
S&P/Case-Shiller Indices Decline
Data through January 2009, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, show continued broad based declines in the prices of existing single-family homes across the United States, with 13 of the 20 metro areas showing record rates of annual decline, and 14 reporting declines in excess of 10 percent vs. January 2008.
“Home prices, which peaked in mid-2006, continued their decline in 2009,” says David M. Blitzer, chairman of the index committee at Standard & Poor’s. “There are very few bright spots that one can see in the data. Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSAs falling more than 20 percent in the last year. Indeed, the two composites are very close to that rate and have been reporting consecutive annual record declines since October 2007. The monthly data follows a similar trend, with the 10-city and 20-city composite showing 30 consecutive months of negative returns.”