Fitch: 2016 Home Improvement Spending Projects 4% Increase

Fitch Ratings, New York, said home improvement spending is in line for another steady increase this year.  

The report, The Tale of the ‘Measuring’ Tape–U.S. Home Improvement Industry–said with the U.S. economy continuing to strengthen and home values improving, home improvement spending should increase by 4.5 percent in 2016.  

Fitch Director Robert Rulla said the housing recovery is expected to continue this year, while increased housing turnover should bode well for home improvement spending.

“Homeowners will typically remodel when buying a home either to fix it up or customize it to their tastes,” Rulla said. “Potential home sellers also tend to remodel to prepare their homes for sale.”  

The report, however, cautioned on potential headwinds. Fitch said higher interest rates could slow refinancing and cash-out activity, while tight construction labor markets could lead to higher costs and construction delays. Negative equity overhang also still lingers over the housing market. “Homeowners with little or no equity may underinvest in maintenance and remodeling projects,” Rulla said.  

The report also warned emerging labor constraints could also temper growth, noting while construction employment has recovered somewhat, it remains 17 percent below peak levels seen in 2006.  

“As the construction recovery continues to moderately advance, labor shortfalls, delays in construction and higher labor costs are likely to persist and become more widespread, Rulla said.