A look at varying housing market trends
Home sales decline, home improvement markets grow
MADISON, Wis. – While the real estate market for single family homes had a dramatic downturn in 2022, some other construction businesses like home remodeling and apartment construction are growing and are projected to continue that growth into 2023.
The dramatic news of existing home sales declines (down more than 26% in September from January) seems to signal a bleak picture for residential construction. The slowing home sale market follows mortgage interest rate increases that have doubled — with rates passing 7%. But a look into new home construction figures from the St. Louis Federal Reserve Bank presents a less pessimistic picture.
New home starts did slow by 7.6% in September, but the number of new single family building permits issued only dropped by 3.1% from a year earlier. And the number of permits for multi-family buildings (5 or more units) actually increased by almost 29%.
The new permits issued statistics project farther forward for future housing than home construction starts. And both new permits and housing starts mean more to future new home construction than existing home sales.
Also showing a brighter picture than home sales for the next year is the home improvement market. The Joint Center for Housing Studies at Harvard University projects remodeling growth for the next year at 6.5%. This is far slower than the peak growth of 17.8% during the last 12 months. But it is still a projection welcomed by suppliers to that market who note the median age for a house in the U.S. has increased to 40 years — making maintenance projects more necessary.
“Energy efficiency retrofits incentivized by the Inflation Reduction Act of 2022 as well as disaster repairs and mitigation projects ….will further support expansion of the home remodeling market to almost $450 billion in 2023,” according to Abbe Will, Associate Project Director of the Remodeling Futures Program at the Center.
Headwinds for remodeling will come from rising interest rates and the increasing costs of labor and materials for remodeling projects, according to the Center’s Leading Indicator for Remodeling Activity. But they also noted record amounts of home equity helping to enable remodeling and maintenance work.
The Joint Center for Housing Studies at Harvard University projected slower but still robust growth for the next year in U.S. home improvement from recent very high peak growth of 17.8% in the quarter that ended on September 30. For the year beginning October 1 of this year, the center has projected growth of 6.5%.