With new mortgages hard to get and home sales slow, homeowners in July continued their push into remodeling projects that add space, amenities, and/or comfort, according to the Residential BuildFax Remodeling Index for July, which was released last week.
Year over year, the RBRI rose 24.5% in July, to 130.4 from 104.7, marking the index’s twenty-first consecutive monthly gain in its year-over-year readings. The July index also was up 0.6%, from 129.5, since June. Month-over-month, the West and Midwest posted respective gains of 3.4 points (3%) and 4.9 points (5%) in July, while the Northeast and South saw respective declines of 2.7 points (3.4%) and 3.3 points (3%) – although all four regions saw year-over-year gains, according to the RBRI.
The expected trajectory
An increase in sales of building materials and in the number of projects billed at $10,000 or more helped push the index to its highest level since its launch in 2004, BuildFax reported. One emerging concern, said BuildFax’s vice president of research and development, Joe Emison, is that many owners of the remodeled properties have not increased their insurance coverage commensurately.
“This remodeling boom is leaving many of these properties underinsured, as the value of these renovations is often not being captured by the homeowners’ insurance companies,” Emison said in a press release.
Although remodeling activity likely will slow in some regions as winter arrives and ongoing economic uncertainty weighs on consumer spending, the expectation is that, over the next several years, homeowners will favor home improvements over sales and new- or existing-home purchases.
As an analysis released early this year by the Joint Center for Housing Studies of Harvard University pointed out, homeowners are now much more inclined than ever to spend on upgrades to their own homes and, to a slightly lesser extent, whatever rental properties they might own. Most of the remodeling activity, the JCHS study showed, is expected to occur in and around the top 35 metropolitan markets, which house about 43% of the nation’s homeowners and account for about 55% of the total spending on home improvements.
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Remodeling activity has generally increased since 2009; data compiled monthly for the BuildFax Remodeling Index show 21 consecutive increases in the index’s year-over-year readings through July.
