Report: Renovation Spending to Set Record

Home-renovation spending in the U.S. will set records this year and next as a slump in housing demand prompts owners to improve properties instead of selling, according to a Fitch Ratings forecast.

"People are staying put and deciding to add an extra room or upgrade features of their existing homes," Robert Curran, a Fitch managing director, said Monday.

Spending on floor tile, granite countertops, wood flooring and other renovation supplies probably will reach $227 billion this year and $230.4 billion in 2007, Fitch said in its report. Spending reached an all-time high of $215 billion in 2005.

The increase won't necessarily be a boon to Home Depot Inc. the world's largest home-improvement retailer, and rivals such as Lowe's Cos., Curran said.

While the "big box" home improvement stores probably will see a modest gain in revenue, 70 percent of the construction work will be done by contractors, who often use wholesalers, he said.

"In periods past when we had declines in the economy, we'd see the do-it-yourself part of it pick up, but we're projecting the economy will be growing in the new year," Curran said.

A "lag effect" from last year's record home prices and sales will help boost renovation spending, Curran said. Homeowners typically want to change newly purchased houses to suit their own tastes. Now, high real estate prices have forced many buyers to put off the start of projects until they could save more money.

"People usually buy as much square footage as they can afford, and it takes some time to scrape up enough cash to finish the basement or redo the kitchen," Curran said.