Homeowners are more interested in refurbishing their residences, as based on a recent report, remodeling activity is on the rise among professionals in the construction industry.
The National Association of Home Builders' Remodeling Market Index reached 57 between July and September, marking the sixth quarter in a row that the measure has been above 50. Any value above 50 is an indication that remodels are busier than they were during the previous three-month period.
Paul Sullivan, chairperson for NAHB Remodelers, indicated that renovation firms have been busy over the past several months and are optimistic about what to expect as the year winds its way to a close.
"Most remodelers remain confident that the market is improving as home owners undertake renovations, large and small," said Sullivan. "The consistency and longevity of positive RMI readings are in line with the gradual recovery of the housing industry."
David Crowe, NAHB chief economist, noted that the remodeling index serves as a microcosm of the housing market in general. With the RMI being at or north of 50 for more than a year now, this is only the latest indication that the housing industry is recovering and will likely continue to do so. There may be some obstacles to overcome, however.
"The major headwind to a stronger recovery is a shortage of qualified labor and subcontractors in some parts of the county, making if difficult for remodelers to employ carpenters and finish projects as quickly and economically as many of their customers expect," said Crowe.
Remodeling should be coupled with insurance enhancement
Consumers who have recently remodeled their residence should be sure to upgrade their homeowners insurance policies, though this should ideally be done before work is completed. After renovating a residence, a home's value tends to rise, due to more expensive fixtures and installations. Should property be damaged after a renovation and a coverage upgrade hasn't been done, property owners may be short of the funds they need to fully restore what's been destroyed.
Despite stellar remodeling numbers, home appreciation levels are growing at a slower pace, according to recent numbers from real estate listing firm Zillow. Real estate values through the end of the second to last quarter of 2015 are forecast to grow at 3 percent, roughly 50 percent of the current pace.
"We always knew these market conditions couldn't last, and it's good to see us now on a more natural and sustained glide path down toward more normal market conditions of roughly 3 percent annual appreciation and more balance between buyers and sellers," said Stan Humphries, Ph.D, chief economist at Zillow.
He added that home values will likely continue to edge northward, but that uptick will ever increasingly be driven by market fundamentals like household formation and job growth, rather than decreased supply and investor demand.