NEW YORK (AP) — Weaker home sales trends are expected to contribute to a sharp slowing in the home remodeling market.
That’s the conclusion of a report by Harvard University’s Joint Center for Housing Studies. The quarterly report forecasts that spending by homeowners for renovations, expansions and repairs will drop to an annual growth rate of 0.4% by the second quarter of next year from a projected 6.3% in the current quarter.
Sales of already occupied homes were down 2.2% in June from a year earlier, according to the National Association of Realtors. Many homeowners fix up or renovate their homes either before they sell or soon after they buy a home.
Harvard researchers use economic indicators including home sales and construction figures and home remodeling permit statistics in compiling its forecasts. It also uses broader economic reports including the Commerce Department’s gross domestic product and the Conference Board’s Leading Economic Index, a forecasting gauge.
On Friday, the government reported that the second quarter GDP rose at an annual rate of 2.1%, a sharp slowing from 3.1% in the first quarter. GDP figures show spending on housing — including building new homes and remodeling existing ones — has fallen since the first quarter of 2018.
Home sales have been falling because of a lack of available houses and apartments; many homes that were foreclosed during and after the Great Recession were bought by investors and turned into rental properties, taking them off the market. Meanwhile, prices for many homes haven’t returned to pre-recession levels, discouraging owners from selling.
The dearth of available homes has driven prices higher, making them unaffordable for many would-be buyers. The median sales price of a home rose 4.3% from a year ago to $285,700, while wages have risen 3%.
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