Home Owners Spend Less on Remodeling

By: Sara Schaefer Munoz: REALTOR® Magazine Online
Home remodeling contractors finally have time to take a holiday — whether they want it or not.

In the last few years, many home owners took advantage of low interest rates to refinance mortgages and use the proceeds to pay for pricey home improvements that drove up the value of their homes. Now that rates are higher and the market less frenzied, home owners are not so motivated to undertake extensive projects.

Spending on home remodeling rose just 4.3 percent in 2005, peanuts compared to 2004 levels, which rose 20 percent over 2003, according to estimates from Harvard University's Joint Center for Housing Studies. The center also expects single-digit growth in 2006.

For home owners who do embark on remodeling projects, this could be good news. "For consumers, this means they are going to get contractors who return phone calls, and they are going to be able to get two or three bids, instead of just one," says Kermit Baker, a senior research fellow at the center.