Remodeling as a Housing Indicator

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We’re always looking at indicators to see where the housing market is headed, like today’s reading of the Realtors’ “Pending Home Sales Index,” which measures contracts signed for home purchases, hence an indicator of future closings. We look at consumer confidence, construction permits, even employment numbers to gauge housing’s future, but what about remodeling as an indicator?

Today the National Association of Home Builders put out its quarterly remodeling index, which rose to the highest level since 2006.

What does remodeling say about home buying? I think it says two things.

At the top of a housing bubble, there’s a lot of remodeling because a lot of people are buying a lot of homes, and they naturally want to put their personal touches on those homes. We also saw a lot of remodeling during the housing boom because so many borrowers took all that bloated equity out of their homes to pay for new kitchens and bathrooms and swimming pools and “man caves” (I really really hate that term).

Remodeling plummeted during the housing crash because of negative equity, lack of home buying, and zero confidence in housing as an investment. Not to mention that nobody wanted to spend a dime of whatever cash they had on anything.

So now as we bump along the bottom and anticipate a potential double dip, why would remodeling improve?

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