The home renovation market can be a gold mine for contractors, but its cyclical nature means you need to keep track of the trends if you want to be ready when opportunities arise.
Sales of Existing Homes Set to Increase
The greatest demand for home renovations comes from buyers of existing homes. Not only do buyers want to remodel their homes to suit their preferences, but older homes often require repairs and upgrades.
In 2014, a sluggish economy and hard winter held back sales of existing homes, but the numbers are set to improve in 2015. With the economy and job prospects picking up, the National Association of Realtors (NAR) predicts the rate of existing home sales should grow by around 7 percent.
Economic Conditions Encourage New Home Sales
News homes also drive the home renovation market and NAR analysis suggest the rate of new home sales could rise by 30 to 40 percent in 2015. Predictions of higher interest rates are helping to fuel this growth. In 2014, analysts predicted mortgage rates would hit 5 percent by the year’s end. Although they rose to only 3.87 percent, the Mortgage Bankers Association found applications for home loans nonetheless increased by 49 percent.
Many analysts still project mortgage rates of 5 percent or more by the end of 2015, which could motivate prospective home buyers to take advantage of relatively low mortgage rates.
As the economy picks up, so does demand for homes, causing prices to rise accordingly. In 2014, home prices rose by some 6.4 percent and the increase is predicted to continue. Rising home prices may encourage some to buy while they can, but decreased affordability could limit the growth in home sales.
The way buyers intend to use their new property is another factor for contractors to consider. The younger generation’s preference for metropolitan areas, where they can’t afford to buy property, has increased demand for rental homes. Rental home owners spend primarily on maintenance, but hesitate to invest in major renovations.
To keep up with trends in the home renovation market, contact us at Construction Monitor.