Remodeling expenditures rose 12.3 percent in 2004

In 2004, Americans spent $198.6 billion on remodeling projects, according to the U.S. Census Bureau, up from $176.9 in 2003. The 2004 growth in expenditures represents the largest increase in more than a decade.

“A combination of increased home sales, more owner equity and low refinance rates all contributed to the tremendous growth last year,” said Remodelors Council Chairman Don Novak, a remodeler from Cedar Rapids, Iowa, in an NAHB news release.

Also, the NAHB Remodelors Council forecasts continued growth through 2005 to $209 billion, for an increase of 6.3 percent.

Owner-occupied properties saw a major increase in remodeling spending – $143.4 billion in 2004 versus $119.9 billion in 2003. At the same time, spending on renter-occupied properties decreased slightly in 2004, down to $55.1 billion from $57 billion.

“Because of rising home prices, homeowners are more willing than ever to invest in their homes,” said NAHB Chief Economist Dave Seiders, in the release. “We see this as a continuing trend for several years to come.”

Rising home prices have encouraged remodeling in several ways.

• Remodeling has become easier to finance with the increased equity that a homeowner can tap into, either through refinancing or home equity loans.

• Homeowners might decide to remain in and improve their homes when faced with sticker shock from home prices, as homes nationwide have appreciated by 15.1 percent over the last year.

• Rising prices make improvements look like better investments, as a greater percentage of the cost will be recouped in any sale. In markets with rapidly rising prices, it is not unreasonable for the homeowner to expect to eventually recoup the full cost.

The aging housing stock also contributes significantly to remodeling projects. With housing stock at an average age of 32 years and rising, a greater need for maintenance, repairs and the opportunity for more (and more expensive) improvements are expected to continue.