By Josh Boak
AP Economics Writer
WASHINGTON (AP) — An increasing number of Americans are preparing to renovate their homes this year, likely giving a boost to the economy, according to projections released Thursday by Harvard University’s Joint Center for Housing Studies.
The report estimates that spending on remodeling and repairs will climb 8.6 percent this year to $310 billion. The gains would bring renovations close to the 2006 peak of an inflation-adjusted $327 billion.
The additional spending would probably contribute to broader economic growth, creating more jobs for construction workers and building supply firms.
Driving the increased spending are rising house sales: The renovators include both people preparing to put their houses on the market and new owners seeking to customize their houses.
The projected rise also indicates that existing owners are improving kitchens and bathrooms, rather than focusing on necessary repairs for roofs.
The average 30-year fixed-rate mortgage edged up to 3.59 percent from 3.58 percent last week.
The 15-year fixed-rate mortgage slipped to 2.85 percent, the lowest seen since May 2013, and down from 2.86 percent last week. The rate on five-year adjustable rate mortgages slipped to 2.81 percent from 2.84 percent last week.
Mortgage rates are lower than they were in mid-December when the Federal Reserve raised short-term rates for the first time since 2006. The Fed hike was expected to be the first of several and would push mortgage and other rates higher. Instead, weakness in the global economy has helped keep rates low.
A year ago, the average 30-year mortgage rate stood at 3.65 percent and the 15-year was at 2.92 percent.
The spring house-shopping season has gotten off to a solid start. The National Association of Realtors reported Wednesday that sales of existing houses rose 5.1 percent last month to a seasonally adjusted annual rate of 5.33 million. The low rates have made it easier for buyers to afford homes.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount. The average fee for a 30-year mortgage was 0.6 point, up from 0.5 last week. The fee for a 15-year loan was unchanged at 0.5 point. The fee on five-year mortgages rose to 0.5 point from 0.4 point.
“So long as we’re seeing growth in sales and prices, that should be contributing to remodeling activity,” said Abbe Will, a research analyst at the housing center.
Existing houses sold at an annual rate of 5.33 million in March, up 1.5 percent from a year ago, the National Association of Realtors said Wednesday. The median sales price rose 5.7 percent over the past year to $222,700.
The findings appear a bit more optimistic than the results of another remodeling index released this week by BuildZoom, an online market for contractors, and the Massachusetts Institute of Technology’s Urban Economics Lab.
The BuildZoom index, which also studies how intensively a house is remodeled, rose 2.6 percent last year, compared with the 4.4 percent measured by Harvard’s housing center.
The Chicago, New York, Phoenix and San Jose, Calif., metro areas all reported double-digit growth in permits for renovations, while Las Vegas experienced a dip, according to the BuildZoom index.
Despite the increased activity, remodeling remains below the 2005 peak measured by the BuildZoom index.
“We’re not yet at that level of mania where we were during the housing boom,” said Issi Romem, the company’s chief economist.