Home builders more confident in remodeling sector
Posted on Friday, November 9, 2012 at 5:00:52 PM
Falling property values in the wake of the real estate bubble burst forced a number of homeowners to stay in their current homes and make updates rather than move into bigger properties.
This resulted in a surge of remodeling activity in recent years, and building professional are becoming increasingly confident in the marketplace.
During the third quarter, the remodeling index increased to a mark of 50, according to a report from the National Association of Home Builders. This was a five-point increase from the second quarter, and the highest level since 2005. A score greater than 50 indicates there was more activity that the previous three-month period.
"The strength of the RMI, especially in owner-occupied properties, shows that homeowners are investing in remodels as home prices stabilize," said NAHB Remodelers chairman George Moore. "As owners become more confident that investments in housing will hold their value, they are beginning to undertake projects to improve their comfort that they had been putting off."
Different types of remodeling jobs see gains
In the third quarter, the most common remodeling projects involved maintenance and repairs, the report said. The index modeling the level of activity rose to 56 from 50 in the second quarter. Meanwhile, small additions and minor alteration projects jumped to 51 from a mark of 47. In addition, major remodeling projects hit an index of 49, up from the second quarter's level of 42.
Negative equity still an obstacle
Due to falling prices in the wake of the housing market collapse, some homeowners were left underwater on their mortgages. This means they owed more money on their home loans than their properties were worth. Borrowers in this position may find it difficult to qualify for certain types of home improvement loans, since they often entails refinancing against their equity.
However, as the housing market builds momentum, a greater number of households escaped from under the thumb of negative equity during the second quarter this year, according to a report from CoreLogic.
During the three-month period, an estimated 10.8 million homeowners owed more money on their mortgages that their properties were worth, the report said. This accounted for roughly 22.3 percent of mortgaged properties across the country.
Although this may seem like a large number, it was actually an improvement from 11.4 million properties in a similar situation at the end of the first quarter.