Remodels boom as homeowners choose upgrades over new houses

Cory Laws considered selling his house and moving to an updated property with his girlfriend. But he likes his neighborhood, so he decided to spend as much as $100,000 to remodel the Herndon, Virginia,home.

I bought the house for me and my two girls at the time, but theyre adults, said Laws, 61, whos already rebuilt one room and added mahogany floors to his basement to turn it into a guest apartment. Were morphing the house into our haven.

Laws is among U.S. property owners providing a boost to the $300 billionhome-improvement industry. Spending on renovations may rise to a record this year as homeowners with low interest rates decide to stay put and remodel their existing homes, stimulus programs encourage energy-efficiency upgrades, and surging demand for rentals spur landlords to invest in their properties, according to a report released Thursday by Harvard Universitys Joint Center for Housing Studies.

Homeimprovements and repairs now generate about 1.8 percent of U.S. economic activity, slightly below the average over the past decade. As owners gain equity in their properties and rents continue to rise, investment in improvements to the nations housing stock is likely to strengthen, the center said in its study.

Homeowners in U.S. metropolitan areas, where incomes and property values tend to be higher, account for the majority of improvement spending, according to the Cambridge, Massachusetts-based center. From 2011 to 2013, spending rose 5 percent among urban homeowners, while falling 0.2 percent among non-metro households.

Renovation decision

Especially in hot real estate markets such as Washington, D.C. where prices are rising and completed sales increased 8 percent in December from a year earlier, according to data provider RealEstate Business Intelligence LLC people are deciding to renovate rather than move, said Andreas Charalambous, principal of Forma Design.

Charalambous said his Washington-based interior architecture and design firm just completed its best year since its 1994 founding.

And its getting better, he said. People feel more comfortable with whats happening in the economy.

Owners in Washington spent the most on improvements, at $5,000 on average, in 2013, the last year the Harvard housing center studied. Boston homeowners followed, spending an average of $4,900. New York was the largestremodelingmarket, with more than $12 billion in total expenditures. Spending in Washington, Los Angeles, Chicago and Philadelphia ranged from $4 billion to $7 billion, according to the report.

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Remodels boom as homeowners choose upgrades over new houses