As the real estate market cools and home values either fail to rise with the same exuberance as the last few years or — don't quote me — decline — how will the home improvement sector react?

There's already been some weakening this year in intensity, or so remodeling industry experts say. I suppose rising interest rates have much to do with the somewhat gloomy outlook, although what I'm hearing is that there is considerable overestimation of how slow things are getting.

On July 31, Reed Construction Data suggested that the Census Bureau's recent remodeling estimates -- 6.3 percent drop first quarter 2006 versus 2005, were "likely too low, perhaps much too low, for 2005 and 2006."

In Reed's opinion, "remodeling spending has declined little, if any, from a year ago and is now rising modestly. Whether the remodeling market is good or bad, or rising or falling, depends on your perspective."

It took the Remodelors Council of the National Association of Home Builders and the Centers for Housing at Harvard years to get the Census Bureau to adjust its annual valuation of remodeling to more accurate levels. So it's no surprise that Reed or anyone for that matter believes that Census will eventually revise its projections upward a bit.

I think it is human nature to make incorrect assumptions from data. The Economist once suggested that statistics could be tortured to say just about anything, and I guess that the Census Bureau folks simply assume that with houses selling slowly, prices not rising as quickly and interest rates climbing, fewer people are spending money on remodeling.

I had lunch the other day with a sharp book industry executive who reported that a lot of the large chains had concluded that fewer people would be buying real estate-related books from now, so they were shifting their focus to other things (probably more books on how to buy useless junk on the Internet).

I agree that the no-money down, make a million in a day on real estate tomes will likely suffer (hurrah!), but people continue to buy and sell houses -- more slowly, of course -- and real estate deals, especially among baby boomers looking for active adult or retirement places, are long-term decisions.

No one, not even the sales executives at Bells, Books and Candles, can predict the future of real estate. Just counting the number of bubble books in any pile will tell you that.

And that is likely the case with the remodeling market.

There may be much less money to spend on renovation, however.

Home equity has been driving a lot of the renovation market, and, as Fred Glick, president of USLoans Mortgage in Philadelphia suggests, "When homeowners go to refinance the next time, they won't see the amazing increase in value that they've seen in the recent past."

If interest rates continue to climb, borrowing might not be the most cost-effective way to finance a renovation project.

So what does this mean? I would assume that, based on what happened during the real estate slowdown of the mid-1990s, renovation will continue at a comparable rate, but the size and direction of the projects will be smaller.

That's a general outlook. Obviously in markets with unassailable track records on value, the risks of spending money on high-end renovation projects will be much lower than in those areas or neighborhoods that are more marginal.

For instance, people with children will be more likely to spend $100,000 and more on a two-story addition in an excellent school district than in one that's not so good.

Homeowners living on the edge of a neighborhood ready for reclaiming, however, may not wish to get into a lot of debt that they won't recover in a reasonable time. These folks will focus instead on modernizing kitchens and bathrooms for their own use and with an eye toward making their houses more sellable somewhere down the road.

As energy prices increase, much more renovation money will be spent on insulation and more-efficient furnaces and air conditioning systems and other appliances.

Downsizing renovation projects for the duration of this slower market doesn't translate into dark days for the remodeling market, just as it doesn't mean that fewer real estate books will be sold because it takes 14 more days to sell a house than last year.

What it does mean is that the industry has to work harder to help the consumer spend money more efficiently.

That will probably mean a lot of late nights on the Internet, or with noses in renovation books.