Fastest Growing Remodeling Markets Located Primarily in the Sunbelt

With the nation’s residential remodeling market fast approaching an annual volume of one-quarter of a trillion dollars, Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, noted several trends that are changing the industry at a time when it is poised to continue the steady real annual growth of roughly 3% characterizing the past 10 years.

The remodeling market has become increasingly dominated by home owners, who have been contributing about 75% of all remodeling expenditures, and 80% of that spending …

Housing Snapshot

As expected, the Federal Resereve Board last week increased its Federal funds rate by 25 basis points to 2.5%, and banks followed by raising their prime rate to 5.5%. While one-year adjustable rate mortgages have been moving up some, the cost of 30-year fixed-rate mortgages continued to move down slightly. "We will probably see the ARM rise a little more over the next few weeks in anticipation of further rate increases by the Fed while the long-term fixed rates remain fairly flat," said Freddie Mac Chief Economist Frank Nothaft. "Mortgage rates remain historically low, which helps to maintain a robust housing industry. Looking forward, we continue to expect long-term rates will not rise very much this year, and that the economy will grow at a sustainable pace, and this should translate into a continued good atmosphere for housing." Remarks by Fed Chairman Alan Greenspan on the U.S. trade deficit and a proposed fiscal 2006 budget deficit that trims discretionary domestic programs outside of homeland security by 0.7% brought some strength to the dollar at the end of last week and continuing into this week. The Bush Administration is proposing to reduce the budget deficit from 3.5% of the Gross Domestic Product currently to 1.7% by 2008. The Labor Department last week reported that the nation's unemployment rate dropped to 5.2% in January, down from 5.4% in December, and was at its lowest level since September of 2001. Lumber prices took a considerable leap forward last week, surprising many. The cost of framing lumber rose from $384 per 1,000 board feet to $404, according to Random Lengths, compared to $352 a year earlier. But the price rise was even more pronounced for plywood and oriented strand board; the panel composite price surged from $375 to $424 per 1,000 square feet.

Mortgage Interest Rates
30-Year Fixed-Rate	5.63%
15-Year Fixed-Rate	5.14%
1-Year ARM	4.25%
Housing Starts - Dec. 2004*
Total	2.004 million
Single-Family Starts	1.678 million
Multifamily Starts	326,000
New Home Sales Dec. 2005*	1.098 million
Existing Home Sales Dec. 2005*	6.69 million
* Seasonally adjusted annual rate