Home Improvements Make Slow Recovery

Remodeling is important as both an economic activity for homeowners and those in the residential construction sector, but it also tracks well with total existing home sales.

IRS Statistics of Income data for 2009, for example, indicate that nearly $6 billion in tax credits were claimed for these two energy-efficient remodeling tax incentives, which we estimate were used in connection with at least $20 billion in home improvement projects.

These incentives likely boosted the market in early to mid-2009 and at the end of 2010. The 25D credit remains in place today, but the stimulus version of 25C expired at the end of 2010 and was replaced by a much more limited 25C credit.

Customers think it is hard to get financing (90 percent of remodeler respondents). They have lost equity in their homes (81 percent). Customers are uncertain about their future economic situation (74 percent).

There's a reluctance to invest in home when not sure home will hold its value (67 percent). Negative media stories make customers more cautious (62 percent). Inaccurate appraisals make financing more difficult (54 percent).

Improved confidence among remodelers, as seen in Remodeling Market Index, may also bode well for the growth path of existing home sales later this year.

- Courtesy of NAHB