Increased cost of home updates forecasts upswing in market

August 28th, 2015

Homeowners are updating their homes, seeing this spending as a way to invest in the future.

The second quarter of 2015 results from Home Depot signal increased home improvement spending. This is good news for the housing market, as it typically indicates more homeowners are getting ready to sell their homes. The record number of transactions at the retailer is the highest since 2006, according to CNN Money.

Interior fixes
Home prices were up 6.5 percent in June compared to the same month the year before, according to CoreLogic's home price index. Rising prices indicate increasing demand. The increase in demand is encouraging more homeowners to fix up and sell their properties.

In addition to the increase in housing prices, around 13 percent more single-family units were built in July than in June, the U.S. Department of Commerce reported. Home Depot estimates that people moving into a new home lead to average purchases exceeding $900 in the second quarter. The spending is for items like plumbing, appliances and lighting, and other household products and services. The trend suggests homeowners view their properties as investments for the future.

Low mortgage rates helping
The rise in home-related transactions, including decor and plumbing, also points to more homebuyers entering the market through the purchase of an existing home or by building a new one. Some of those buyers are first-timers, coming from the millennial generation. The upswing in job creation is pushing them into the market and making buying homes more affordable, CNN Money reported.

Low mortgage rates are driving refinancing too. Refinancing helps homeowners afford updates, Time magazine reported. The national average for a 30-year fixed-rate mortgage peaked at 3.79 percent on Aug. 19 before dropping to 3.67 percent by Aug. 25, according to Zillow. In addition to low rates, more people are able to make their mortgage payments, allowing them to budget for home improvement too, Forbes reported.

The increased transaction amounts at home retailer Home Depot, rising home prices and housing starts, as well as low mortgage rates are helping the market to move ahead. Homeowners will have to decide whether to continue investing in their properties or to sell during a high demand period.