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Home Prices, Flippers Boost Renovation Businesses

As the busy spring season heats up, home flippers and rising real-estate prices are building a solid foundation for renovation businesses.

Home values have steadily climbed higher over the last year. According to the latest S&P/Case-Shiller Home Price Index, prices across the country gained 5.3% in the 12 months ended in February. Consequently, homeowners and investors continue to raise their bets on the housing recovery, driving demand for home-improvement products and services.

“We’re seeing more business because of real-estate transactions increasing, home equity increasing and higher discretionary spending, and we see that across the board. It’s not regional,” said Dan Tarantin, president and CEO of franchisor Harris Research Inc., the parent company of N-Hance Wood Renewal Opens a New Window.and other brands. “People are tending to their homes more than we’ve seen in several years.”

Pricing trends appear to be split between the top and bottom of the market, as limited inventory is increasing the value of more affordable homes. Zillow (Z) Chief Economist Svenja Gudell said the number of homes for sale in the lower two-thirds of the market fell 10.4% year-over-year in the first quarter, compared to an overall decline of 5.9%.

“Buyers looking for the most expensive homes will find somewhat softening prices, a relatively larger selection of homes to choose from and more limited competition this spring,” Gudell wrote in a first-quarter report on the housing market Opens a New Window.. “At the same time, entry-level and mid-market buyers are likely to face much stiffer competition, rapidly rising prices and very limited inventory.”

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