Rise in Mortgage Rates Deplete Home Renovations

Affordable home equity line of credit and piggy back loans made 2004 and 2005 the time of the home renovation. Considered an investment in the future, the renovations are now taking back seat to rising rates and a slow property market.

Latest figures show that the spending for home renovations are down 4.0% from October to November 2005, and are down 5.6% from November of 2004. Market analysts point fingers at the rising rates and slow moving properties for the downward trend. Americans spent nearly $150 billion last year in home renovations; 2005 remodeling spending rose 4.3% as a total, but cooled drastically in the last quarter.

The figures use many factors to gauge the home remodeling craze; materials bought and sold, number of contracts to independent businesses, sales of existing homes, and shipping of materials used by home owners and builders alike. While 2005 began with a bang, by October of 2005 it had turned more into a fizzle. The largest increase in 2005 was in building supplies for the garden.

Though owning a home is still the most financially sound investment a person can make, people are becoming shy about major renovations due to the softening market and slow property sales. Prices have also stabilized, and rates have risen, making home improvements a dull market for 2006.