CHICAGO -- Home improvement spending is in line for another steady increase this year, according to Fitch Ratings in a new report.

With the U.S. economy continuing to strengthen and home values improving, Fitch projects home improvement spending will increase 4.5% in 2016. The housing recovery is expected to continue this year, and the increased housing turnover should bode well for home improvement spending. "Homeowners will typically remodel when buying a home to either fix it up or customize it to their tastes," said Director Robert Rulla. "Potential home sellers also tend to remodel to prepare their homes for sale."

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That said, the stable outlook for home improvement is not without its potential headwinds. Higher interest rates could slow refinancing and cash-out activity, and tight construction labor markets could lead to higher costs and construction delays. Negative equity overhang also still lingers over the housing market. "Homeowners with little or no equity may underinvest in maintenance and remodeling projects," said Rulla.

Emerging labor constraints could also temper growth: While construction employment has recovered somewhat, it is still roughly 17% below the peak levels seen in 2006. "As the construction recovery continues to moderately advance, labor shortfalls, delays in construction and higher labor costs are likely to persist and become more widespread," said Rulla.

The report also features general commentary and financial information on 12 building and home products issuers with meaningful exposure to this sector as well as the two largest home improvement retailers in the U.S. For more information on 'The Tale of the "Measuring" Tape - U.S. Home Improvement Industry,' visit fitchratings.com.

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