NEW YORK (AP) — Small companies whose success is tied to the remodeling business are looking healthy even as home sales drop.
Two reports last week showed that the housing market is weakening. The National Association of Realtors said sales of existing homes fell for the third straight month during June. And the Commerce Department said sales of new homes fell more than 5 percent last month. Rising interest rates and home prices are blamed for the slowdown. Another Commerce Department report showed that ground-breakings on new homes dropped more than 12 percent in June, a sign that weakness in the market may persist.
But a report released this month by Harvard University's Joint Center for Housing Studies sees a strong home remodeling market though the middle of 2019, a trend that benefits contractors, painters and landscapers who tend to be small businesses. The center forecasts that homeowner spending on improvements and repairs will rise at an annual rate of 7.2 percent over the next four quarters, up from 6.6 percent during the previous four.
Chris Herbert, managing director of the center, said the strong job market and strengthening economy have encouraged owners to invest in their homes. The economy grew at an annual rate of 4.1 percent during the April-June quarter, according to the Commerce Department. While economists don't expect that rate of growth to continue, they still predict that the economy will expand at a healthy pace.
Homeowners have also been fixing and improving their houses and apartments because they expect to stay put for the foreseeable future. Many homeowners can't afford new homes, so they don't put theirs on the market. But that helps boost remodeling — when people decide not to move, they often decide to renovate kitchens and bathrooms, replace roofs and windows and build extensions or decks.
Rising values are another incentive to upgrade homes, and to take on larger projects, Herbert said. When owners perceive their home as being worth more, they feel more confident that they're making a good investment by remodeling.
Slower home sales don't seem to be deterring people from people from going into the real estate business. The National Association of Realtors' membership count rose to 1.33 million in June, up from 1.32 million in May. The June level was the highest since December 2007, just as the recession was officially starting. The Realtors had nearly 1.34 million members then.