2013 is likely to see home values stabilizing—but not because of sale prices. A strengthening labor market is the rising tide that will lift property values, says Abbe Will, research analyst with the Harvard Joint Center on Housing.
The Center makes quarterly projections about remodeling spending. Over the course of the past five years, says Will, large-scale remodeling “nearly completely dried up”. Homeowners concentrated what little they did spend on maintenance and infrastructure, especially on energy- (and dollar-) saving improvements.
In the fourth quarter, unemployment dropped steadily to 7.9% at year-end. In turn, that has bolstered homeowner confidence in values, says Will. She detects early signs that discretionary projects are slowly re-emerging, especially bigger kitchen and bath renovations.
A boom is unlikely, partly due to lenders’ ongoing reluctance to count too much home equity as collateral for renovation financing. It all adds up, says Will, to a yellow light for projects this year. The key is to improve moderately so as not to outstrip comparable values in your neighborhood.