After Recession, Home-Remodeling Is on the Rise

Renovation nations rising again.

Wednesdays report on housing startssuggests a steady trend for construction. But new houses arent the only support to economic growth. Updating a bathroom or adding a deck also contributes.

The Bureau of Economic Analysis tracks home improvements as part of the residential investment sector of gross domestic product. (Single-family homes, the fast-growing apartment sector, dormitories and manufactured homes are also in the residential investment category.)

These are major improvements to your house, saysMichael Armah, a BEA economist. That includes major replacement projects, adding a room and rehabbing a kitchen. Painting a living room or installing a dimmer switch doesnt count.

Like other subsectors of home construction, spending on improvements took a hit in the recession. So far in this expansion, apartment-building has been the lead construction performer because of a consumer shift to renting rather than owning.

But remodeling spending has also climbed back, thanks to the usual upkeep and maintenance, as well as the decision of some homeowners to upgrade or expand their current residences rather than move.

Rising home values have also helped. In Home Depots earnings call Tuesday, the building-supply retailers chief executive Craig Menear said, As home value appreciation has happened, customers are certainly more willing to invest in their homes.

Inflation-adjusted spending on home improvements has slipped a bit in 2014, but in the third quarter it stood just 10% below the subsectors peak in 2005.

In contrast, investment in new single-family homes is still a large 62% off its high of the boom years.

Indeed, real spending on improvements is currently running about even with spending on single-family homes. During the housing boom, investment in new single-family housing outpaced home improvements by a ratio of more than 2.5:1.

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After Recession, Home-Remodeling Is on the Rise