Remodeling to Stay at Historically High Levels

Following a period of “spectacular growth,” the nation’s residential remodeling market is a market that’s currently in a state of “transition,” according to a leading housing industry economist. William Apgar, an analyst with the Joint Center for Housing Studies of Harvard University, told attendees of a recent Joint Center conference, that uncertainty concerning the nation’s overall housing market is “likely to dampen remodeling spending.”

Apgar also pointed to the current slowdown in home-price appreciation and the fact that the cash-out refinancing boom is nearing its end as factors he expects to slow the growth of the residential remodeling market to a single-digit pace. The remodeling industry, Apgar noted, has posted record growth over the past two decades, to some $280 billion in 2005, with high-end spending leading the growth, and “solid” growth in the professional segment. In contrast, he forecast a “return to basics” through the short-term future, with growth driven by an aging housing stock and a continued response to disaster losses. Longer-term gains, he added, will be attributable largely to growth in housing inventory, as well as households adjusting to “massive wealth accumulation that has occurred over the past decade.”

Home Sales

Existing-home sales stay high, but show slowing

Existing-home sales eased but prices stabilized as inventories tightened in December, while 2006 was the third-highest sales year on record, according to the National Association of Realtors.

Total existing-home sales eased 0.8 percent to a seasonally adjusted annual rate of 6.22 million units in December from a level of 6.27 million in November.

There were 6,480,000 existing-home sales in all of 2006, down 8.4 percent from a record 7,075,000 in 2005. The second highest total was 6,779,000 in 2004.

David Lereah, NAR’s chief economist, said home sales remain historically high. “Despite all of the doom-and-gloom stories and dire predictions over the last year, 2006 was the third strongest year on record for existing-home sales,” he said. “It looks like we’re moving beyond the low for the housing cycle last fall, and buyers are responding to historically low interest rates and competitive pricing by home sellers.”

Total housing inventory levels fell 7.9 percent at the end of December to 3.51 million existing homes available for sale, which represents a 6.8-month supply at the current sales pace — down from a 7.3-month supply in November.