The Joint Center for Real Estate Studies at Harvard University recently reported that investment in home remodeling and renovations will reach unprecedented spending levels in late 2016 and early 2017. Their projections estimate that growth will reach 8.6 and 9.7 percent respectively.

The results, published in their study, the Leading Indicators of Remodeling Activity (LIRA), estimate spending for home remodeling in fourth quarter of 2016 to reach $309.9 billion and $323.3 billion in the first quarter of 2017. By contrast, spending on remodeling totaled $285.4 billion in the fourth quarter of 2015 and $294.9 billion for first quarter 2016.

What This Means

Home remodeling trends often indicate the health of the housing market and strength of the economy. Since the U.S. housing market has recovered from the Great Recession, the robust spending on remodeling indicates homeowners feel confident about the real estate market and are willing to make investments in home improvements.

The rate of spending on home renovations sometimes indicates the reverse. Homeowners are more likely to invest in home renovations when housing markets are slow, since it’s often more economically more advantageous for them to make their current homes more livable than try to sell in a down market.

Benefits of Home Improvements

Regardless of market conditions, some improvements do pay off. The National Association of Realtors (NAR) conducts an annual study called Cost vs. Value that measures the payback of home improvements.

Their recent findings indicate that projects with the greatest rewards are those that improve energy efficiency and the overall appearance of the home, from new front doors to kitchen and bathroom upgrades.

The NAR recognizes that the intangible benefits of home remodeling are just as important as increasing the value of the home, such as:

• Not moving. The entire process of moving creates a good deal of stress and it’s also an expensive one. If you’re choosing a different home based on a few inadequacies in your existing home, remodeling it will give you the exact changes you’re looking for.
• Increasing enjoyment of a home. The kitchen of your dreams or a more comfortable living area help you have a more positive experience in your home. Renovations make it possible for your home to evolve with you, whether it’s a change in family size or the desire to give it a whole new look. You can choose precisely what you want without having to compromise on what’s available in the resale market.
• Increasing value. How much a home upgrade increases the value depends on many variables within and outside of your control. Being realistic about the improvements you make, particularly for your neighborhood, will help you scale the project to get the best payback from your investment.
• Faster home sale. Nearly all prospective home buyers start their searches online where they can view photos or watch a virtual tour. Upgrades and updates won’t go unnoticed, and might give you a competitive edge over other homes in your neighborhood, size, or price range. Depending on your situation, a quick home sale can be as financially advantageous as holding out for top dollar.

The all-around benefits of updating and remodeling your home make the effort and investment an attractive alternative. Upgrading your home has few risks regardless of the performance of the real estate market.

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