Qualified Remodeler Magazine

FEB 2019

Qualified Remodeler helps independent remodeling firms to survive, become more professional and more profitable by providing must-have business information, namely best business practices, new product information and timely design ideas.

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Page 8 of 70

ANNUAL GROWTH in the national market for home improvement and repair is expect- ed to slow considerably by the end of 2019, according to Harvard's Leading Indicator of Remodeling Activity (LIRA). The LIRA projects that gains in renovation and repair spending to owner-occupied homes in the U.S. will shrink from 7.5 percent in 2018 to 5.1 percent in 2019. "Slowing house price appreciation, flat home sales activity, and rising mortgage in- terest rates are deflating owners' interest in making major investments in home improve- ments this year," says Chris Herbert, managing director of Harvard's Joint Center for Housing Studies. "Continued slowdowns in homebuild- ing, sales of building materials and remodeling permits all point to a more challenging envi- ronment for home remodeling in 2019." "Despite the growing headwinds, im- provement and repair spending is still set to expand this year to over $350 billion," says Abbe Will, associate project director in the Remodeling Futures Program at the Joint Center. "But aƁer several years of stronger-than-average increases, the pace of growth in remodeling activity is expected to fall back to the market's historical average annual gain of 5.2 percent." Industry Outlook Expected Gains in Remodeling Spending to Slide Lower in 2019 Industry Outlook Existing-home sales see 6.4 percent drop, prices continue to rise AƁer two months of increases, existing-home sales declined in December, according to the National Association of Realtors (NAR). None of the four major U.S. regions saw a gain in sales activity during the month of December, the association said. Total existing-home sales—complet- ed transactions that include single-family homes, townhomes, condominiums and co- ops—decreased 6.4 percent from November to a seasonally adjusted rate of 4.99 million. Sales are down 10.3 percent from a year ago, or 5.56 million, in December 2017. Lawrence Yun, NAR's chief economist, says current housing numbers are partly a result of higher interest rates during much of 2018. "The housing market is obviously very sensitive to mortgage rates. SoƁer sales in December reflected consumer search pro- cesses and contract signing activity in pre- vious months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring." The median existing-home price for all housing types in December was $253,600, up 2.9 percent from December 2017 ($246,500). December's price increase marks the 82nd straight month of year-over-year gains. First-time buyers were responsible for 32 percent of sales in December, down from the prior month (33 percent), but the same as a year ago. NAR's 2018 Profile of Home Buyers and Sellers—released in late 2018—revealed that the annual share of first-time buyers was 33 percent. All-cash sales accounted for 22 percent of transactions in December, up from November and a year ago (21 and 20 percent, respec- tively). Individual investors, who account for many cash sales, purchased 13 percent of homes in December, the same as November but down from a year ago (16 percent). Regional Breakdown December existing-home sales in the North- east decreased 6.8 percent to an annual rate Leading Indicator of Remodeling Activity — Fourth Quarter 2018 Note: Historical estimates since 2015 are produced using the LIRA model until American Housing data becomes available. Source: Joint Center for Housing Studies HOMEOWNER IMPROVEMENTS & REPAIRS FOUR-QUARTER MOVING TOTALS BILLIONS OF $ FOUR-QUARTER MOVING RATE OF CHANGE 278.0 5.1% 4.5% 5.0% 5.7% 6.2% 6.4% 6.3% 6.1% 6.2% 6.7% 7.0% 7.4% 7.5% 7.2% 7.0% 6.7% 5.1% 10% 5% 0% -5% 279.0 284.4 290.3 295.2 297.0 302.3 308.0 313.6 316.9 323.5 330.7 336.9 339.5 346.2 352.9 354.2 2 2 2 2 (P) 3 (P) 4 (P) 3 3 3 4 4 4 4 2016 -1 2017 -1 2018 -1 2019 -1 (P) $450 $425 $400 $375 $350 $325 $300 $275 $250 $225 Historical Estimates LIRA Projections IN BRIEF 8 February 2019 QualifiedRemodeler.com

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