While Some Say Home Improvement is Slowing, Wall Street Seems to Disagree

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As a freelancer, your house is usually more than the place you call home. Instead, it’s your office, conference room and cafeteria, the place where you are building your somewhat nontraditional career. For this reason, some people will likely feel that renovating their home is an important investment, even if all the noise from the remodeling and construction work causes you to flee to a local cafe to focus on your work.However, two indexes dedicated to gauging home remodeling activity in the United States recently indicated that the industry could be slowing. But if you have been planning to renovate your home, don’t count yourself out just yet: experts say that Wall Street seems to be telling a different story.

 

Research shows that home remodeling industry generates an estimated $47 billion worth of revenue in the U.S. However, according to measurements taken by the National Association of Home Builders’ (NAHB) Remodeling Market Index, future market conditions fell to 55.4 in the first quarter of 2015. This follows a record-high of 59.5 in the fourth quarter of 2014. Similarly, a leading indicator of remodeling work designed by Harvard University projected that annual growth in home improvement spending will slow to 2.9% by the end of the year, a drastic change from the expected 6.5% in the first quarter.

Despite these negative connotations, however, investors seem to be placing an increasing amount of trust in the industry. While 2014 was reportedly a comparatively weak year for renovations, analysts say that investor sentiments have noticeably improved since the fourth quarter. For example, Standard and Poor’s Homebuilding Select Industry Index, made up of 35 housing-related companies like Home Deport and several major construction companies, has outpaced the benchmark index by around 14 points since September 30. One North American remodeling company, Mohawk Industries Inc., has even seen a stock price appreciation of 24 points.

This same improvement can be seen in the housing market as well: experts are calling March a “blockbuster month” of sales for existing homes, with purchases of single-family residences increasing 6.1% to a $5.19 million seasonally-adjusted annual rate, the fastest pace in four years. Moreover, executives from home improvement stores like Sherwin-Williams Co. have described their expectations for future sales as “optimistic” in recent weeks. Similarly, Home Depot said it was confident about its chances due to evidence of a slow, steady recovery in the housing market.

Further support for remodeling can be seen in Americans’ growing intentions to undertake these projects. In a semi-annual survey of 404 homeowners, Piper Jaffray and Co. in New York City found that 58% of respondents plan to spend more this year to make basic changes to their homes, such as painting, replacing flooring and upgrading their kitchens. As a result, the group upgraded their recommendation on Lowe’s from neutral to overweight, and hinted at a possible acceleration in home improvement spending in the next year.

Due to severe weather in the first quarter, March is off to a slower start than expected, with NAHB’s index of future conditions falling to a one-year low as everything from calls for bids to the job backlog decreased from the previous quarter. Still, many experts are saying that the home remodeling industry can expect stable, modest growth, with all owner-occupied projects expected to increase 2.3%, compared to 0.4% in 2014. Some in the industry have even speculated that the amount spent on remodeling and construction this year could exceed the previous record for spending set in 2007. With these positive statistics, there is no reason not to transform your home into an environment that fits both your personal and professional lives.
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