Expected slowdown in remodeling is good news for mortgage business

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Remodeling activity stepped up in recent years as homeowners stayed put for nearly twice as long as before the housing bubble burst. But several forecasts point to a potential slowdown on the horizon, which is a welcome sign for the mortgage business, according to the Mortgage Bankers Association.

Money spent on home improvement and repair for owner-occupied housing stock should decelerate into early next year, according to a study by the Joint Center for Housing Studies of Harvard University.

It projects growth in homeowner remodeling expenditure to fall from the current rate of 7% to 2.6% in the first quarter of 2020 as home sales, prices and remodeling permitting slow. Should this be true, it would mark the first time this index value has dropped below the 5% market historical average since 2013, according to JCHS.

However, attractive mortgage rates could push up home sales and refinances, which may result in more remodels.

Signs of slowing remodeling activity reinforce the idea that homeownership tenure may be shifting direction and create some movement throughout the housing market. Housing tenure ticked down in the first quarter to 8.05 years from the record-high 8.17 years achieved in 4Q18, according to Attom Data Solutions.

While this is a good news for housing, it's still way up from the 4.21 years averaged between 2000 and the first quarter of 2007, before the Great Recession.

Separately, the National Association of Home Builders also pointed to signs that remodeling activity will calm. Its Remodeling Market Index fell three points in 1Q19 from the prior quarter, and its future market indicators also declined by two points.

"NAHB's forecast calls for slowing growth, given declining home price appreciation and existing home sales volume, combined with rising construction costs," Robert Dietz, NAHB chief economist, speaking on the remodeling market, said in a press release.

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Housing market Homebuilders Home prices Housing inventory Real estate Mortgage Bankers Association NAHB Attom Data Solutions