• Tue. Aug 3rd, 2021

Home improvement spending rose in 2020 despite mortgage disruptions

Renovation expenditures faced challenges last year, but managed to increase over 2019 and will likely climb further in 2021, according to a report published Thursday by Harvard University’s Joint Center for Housing Studies.

Spending used to maintain or improve owned or rental housing climbed 3.5{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} to an estimated $419 billion in 2020, up from $406 billion in 2019; and this year it’s forecast to rise at least another 3.3{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} to $433 billion, the center’s analysis of multiple data sources shows.

That growth could be attractive to a mortgage industry that needs to find new loan sources as easier rate-and-term refinances dwindle, said Jim Bopp, a vice president at Planet Home Lending.

“The industry is working on bringing this product back,” he said.

Although several mainstream lenders pulled back from remodeling and construction financing last year due to the pandemic’s early risks and restrictions, many have since returned to the market.

Image

Bopp is optimistic about prospects for this year because, with vaccines rolling out and consumers faced with the shortage of for-sale homes in good condition, borrower demand for financing to repair their own homes or buy fixer-uppers could accelerate.

Right now, projections for spending growth in 2021 to date might not be quite as strong as in 2020 because the coronavirus’ impacts have been constraining the number of borrowers in lower-income tiers eligible for or interested in renovation financing.

At the end of 2020, more than 22{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} of those in the below $25,000 income bracket, and 16{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} of those making $25,000-$50,000 per year were behind on payments for more standard mortgages.

However, as vaccines roll out and the economy recovers, those barriers could lift.