By JOYCE M. ROSENBERG
AP Business Writer
NEW YORK (AP) — General contractors and other small businesses in the home-remodeling industry can expect their revenue inflows to slow in 2019 as a result of rising mortgage rates and sluggish home sales.
That’s the prediction of Harvard University’s Joint Center for Housing Studies, which last week issued its quarterly report on home remodeling. The center’s index of remodeling work predicts spending on renovations and repairs will gradually slow into the third quarter. Spending is expected to rise in the current quarter by only 7.7 percent above what it was a year ago, and 6.6 percent in the July-September 2019 period.
A 6.6 percent gain is by no means weak, but is nonetheless a sign that the remodeling boom of the past few years is waning.
Many homeowners renovate and make repairs before they sell and after they buy a house, but spending on remodeling has largely withstood a dip in home sales over the past year. Home sales have been hurt by an ongoing shortage of houses and apartments on the market. Existing home sales fell by more than 4 percent from September 2017 to September this year, the National Association of Realtors said on Friday.
Rising interest rates are affecting both home sales and remodeling work. Home-mortgage rates are at their highest levels in more than seven years, and the 30-year mortgage rate is close to 5 percent. Typical monthly payments are up by 15.4 percent from what they were a year ago, according to the real estate data company Zillow, which calculates that it costs about $118 a month more to buy the same house today than it did this time in 2017.
Many homeowners borrow to finance home improvements, so rising rates may deter some of them from starting projects.
Homeowners’ reduced spending resulted last month in weaker sales of building materials and gardening equipment and supplies; those sorts of sales rose just 1.5 percent in September from a year ago, down from the nearly 5 percent gain seen in August, according to the Commerce Department. That weakness will affect retailers, including small and independent stores, that sell those goods.
The slowdown may also continue past next year’s third quarter. The Realtors said their index for pending home sales fell by 1.8 percent last month to 104.2. The index, which tracks signings of sales contracts, is down 2.3 percent over the past year.