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Harvard Index Shows Gains in Remodeling Activity

Home owners increased their spending on renovations and improvements at a 6.1% annual pace in the first quarter of this year, according to the Remodeling Activity Indicator. This was up from a 5% rate during the final quarter of 2002.

“A recovering economy has helped accelerate the annual growth rate for remodeling spending,” said Kermit Baker, director of Harvard University’s Joint Center for Housing Studies' Remodeling Futures Program. “As long as mortgage rates stay in favorable ranges, home sales and the resulting home improvement projects will remain strong.”

Further declines in residential mortgage rates this year, which fell to a 40-year low in March and have lingered close to that level since, have fueled refinancings and enabled home owners to cash out some of their equity, helping to sustain the economy.

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About 35% of this extra cash is spent on home remodeling, said Baker.

The remodeling index’s quarterly reading of national remodeling expenditures takes into account manufacturers’ shipments of floor and wall tile products, sales at building materials and supply stores, sales of existing single-family homes and the prime interest rate.

The index provides information on residential improvements and repairs a full two quarters before data is released by the Commerce Department.

The index for this year’s second quarter will be released during the third week of July.
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