Market Holding Own in Face of Housing Dip

As 2006 came to a close, evidence showed that the residential remodeling sector was holding its own, even in the face of the continued slide in housing.

Remodeling activity picked up in the third quarter of 2006, according to the National Association of Home Builders’ latest “Remodeling Market Index,” which revealed modest upticks in both current market conditions and future expectations. Results of the quarterly series of remodeler surveys were released last month. “Though market strength varies across the country, we’re pleased to see a rebound in remodeling activity,” said NAHB Remodelors Council chairman, Vince Butler. “The trillions of dollars in homeowner equity combined with the growing age of the housing stock means that the remodeling market will remain relatively strong in the face of a slower housing market.”

“While growth of remodeling activity slowed as new home construction has declined, we still anticipate a strong year in the remodeling market,” said NAHB chief economist, Dave Seiders, adding that the NAHB is currently forecasting $233 billion in home remodeling spending for 2006, up from $215 billion in 2005.

Existing-home Sales

Following a “correction” in home sales and prices in 2006, existing-home sales are expected to “coast” at roughly the same level next year, although there will be some additional decline in the new-home market, according to the latest forecast released by the National Association of Realtors.

“Overall home price gains will be modest, and sellers are adjusting to the market transition,” said David Lereah, chief economist for the Washington, D.C.-based NAR. “Home sellers are becoming realistic about current market conditions and are now offering more competitive pricing, in addition to some incentives or concessions — especially to help first-time buyers.

“We now have the most favorable market for home buyers in several years, and most sellers are still seeing very healthy returns on their investment. The market promises to be more balanced between buyers and sellers by early spring, supporting future price growth,” he added.
Existing-home sales, expected to fall 8.6 percent, to 6.47 million in 2006, are projected to be essentially even in 2007, with a 0.6 percent decline to 6.43 million, the NAR said. New-home sales, likely to drop 16.8 percent to 1.07 million in 2006, are forecast to fall another 8.7 percent next year to 975,000, largely due to a significant reduction in construction by builders. Total housing starts this year will probably fall 10.6 percent to 1.85 million units, and then decline another 11.8 percent to 1.63 million in 2007.

Market Analysis

Homeowners confident over housing prospects, survey reveals

Washington, D.C. — Americans remain highly confident about the nation’s housing prospects, with more than four out of five homeowners expecting the value of their home to appreciate over the next five years and nearly seven out of 10 calling it their most valuable investment, according to the results from a new nationwide survey.

Results of the survey, conducted by the Washington, D.C.-based National Association of Home Builders, were announced last month. The survey, involving some 2,000 households, was conducted in late October of 2006, the NAHB said.

“The poll clearly debunks the more sensational media reports speculating on the demise of the housing market,” commented NAHB president, David Pressly. “It’s interesting to note that other polls conducted by major news organizations have come up with similar results, indicating that despite the current housing market downturn Americans resoundingly believe that buying a home is the best investment they can ever make.”
According to the NAHB, the poll revealed 81 percent of homeowners believe the value of their homes will rise over the next five years. In contrast, only 13 percent felt their home would fall in value, while 4 percent expected no change and 3 percent were unsure.