By JOYCE M. ROSENBERG
AP Business Writer
NEW YORK (AP) — Weaker home sales trends are expected to contribute to a sharp slowing of the home-remodeling market.
That’s the conclusion of a report by Harvard University’s Joint Center for Housing Studies. The quarterly report forecasts that spending by homeowners for renovations, expansions and repairs will drop to an annual growth rate of 0.4% by the second quarter of next year, down from the projected rate of 6.3% in the current quarter.
Sales of already occupied homes were down 2.2% in June from a year earlier, according to the National Association of Realtors. Many homeowners repair or renovate their homes either before they sell or soon after they buy a home.
When compiling their forecasts, Harvard researchers use economic indicators such as home sales and construction figures and statistics on home-remodeling permits. They also rely on indicators such as the Commerce Department’s gross domestic product and the Conference Board’s Leading Economic Index, a forecasting gauge.
On Friday, the government reported that GDP rose in the second quarter at an annual rate of 2.1%, showing a sharp slowdown from the 3.1% seen in the first quarter. GDP figures show tat spending on housing — including the construction of new homes and remodeling of existing ones — has fallen since the first quarter of 2018.
Home sales have been falling because of a lack of available houses and apartments; many homes that were foreclosed during and after the Great Recession were bought by investors and turned into rental properties, taking them off the market. Meanwhile, prices for many homes haven’t returned to pre-recession levels, discouraging owners from selling.
The dearth of available homes has driven prices higher, making them unaffordable for many would-be buyers. The median sales price of a home rose 4.3% from a year ago to $285,700, even as wages have risen by 3%.