CAMBRIDGE, Mass – Led by strong demand by high-income households and buoyed by steadily rising home prices, remodeling spending reached $214 billion in 2001 according to a new report by Harvard University’s Joint Center for Housing Studies. “During this past economic downturn, homeowners increased their spending on home improvements” explains Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “Growing home equity coupled with a refinancing boom provided the incentive and the means for many homeowners to reinvest in their homes,” says Retsinas.
The report, Measuring the Benefits of Home Remodeling, underscores the importance of remodeling to the overall national economy, as well as to enhancing the financial situation and quality of life for individual homeowners. Kermit Baker, the director of the Joint Center for Housing Studies’ Remodeling Future Program, commented, “Despite its size and growth, home improvement activity is a ‘stealth’ industry, flying below the radar of most macro-economic analysts.”
The report provides an assessment of the country’s home remodeling trends, covering: Emergence of The High-End Market; Home Equity and Spending Growth; Demographic and Regional Drivers; and The Evolving Home Improvement Industry. Some of the key findings include:

· High-spending homeowners are responsible for an increasing share of overall expenditures. The 6.3 percent of owners who spent $20,000 or more on home improvements accounted for almost half of the 2000-2001 total, while the 2.7 percent of households spending $35,000 or more accounted for over a third.

· Minorities, and particularly Hispanics, are an increasingly important force in home improvement markets. Minorities are a growing share of homeowners and therefore of home improvement spending. Since 1995, home improvement spending by Hispanic owners jumped by an impressive 78 percent, more than three times the rate of growth for white households.

· Remodeling share of residential investment has been growing. Nationally, remodeling accounts for about 40 percent of total residential investments. In the Northeast, where homes are older and construction opportunities are limited, spending on home improvements exceeds spending on new construction.
The home remodeling market has seen continued strong growth. The composition of that market should change with minorities playing a key role in the future. Aging baby-boomers concerned with the quality and usability of their homes will be more inclined to hire a remodeling contractor for their improvements.