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Homeowners, builders optimistic

By Judy Martel · Bankrate.com
Thursday, January 16, 2014
Posted: 5 pm ET

Confidence in the housing recovery among homeowners is projected to fuel strong growth in home improvement projects during the first half of the year, but activity will taper off in the second half as a result of higher borrowing costs.

addition-remodel-lgAn index developed by the Joint Center for Housing Studies at Harvard University indicates double-digit gains in remodeling activity for the first half of 2014. Homeowners are feeling positive about a rise in housing starts, existing home sales and prices.

No more putting off projects

"As owners gain more confidence in the housing market, they are likely to undertake home improvements that they have deferred," Eric Belsky, managing director of the center, said in a prepared statement.

Toward mid-year, the gains will slow to just below 10 percent, according to the index. Increased borrowing costs under the new, qualified mortgage rules will cause some homeowners to pull back from refinancing.

This week the Mortgage Bankers Association lowered its estimates for refinance originations for 2014, from $463 billion to $440 billion, or approximately 60 percent lower than refinance originations in 2013.

New-home construction could see gains, too

Homeowners aren't the only ones expressing confidence. The latest index on homebuilder sentiment, released by the National Association of Home Builders, shows a slight decrease in confidence in January from a month earlier, but builders believe 2014 will bring gains in new-home construction.

"Rising home prices, historically low mortgage rates and significant pent-up demand will drive a continuing, gradual recovery in the year ahead," NAHB Chief Economist David Crowe said in a prepared statement. "However, the pace of the recovery could be stronger were it not for rising construction costs and inaccurate appraisals that are keeping some home sales from going through."

The index, which measures buyer traffic, sales expectations over the next six months and current sales conditions, fell 1 point in January, to 56. A number above 50 signifies a positive outlook. Regionally, the Midwest fell by 1 point, the South stayed the same and the West and Northeast both gained.

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3 Comments
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md mosleuddin
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