Steep Slowdown Projected in Home Improvements
Cambridge, Mass. -- Growth in residential remodeling spending is expected to slow considerably by the middle of next year, according to the Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects that annual gains in homeowner expenditures for improvements and repairs will shrink from 6.3% in the current quarter to just 0.4% by the second quarter of 2020.
“Declining home sales and homebuilding activity coupled with slower gains in permitting for improvement projects will put the brakes on remodeling growth over the coming year,” said Chris Herbert, managing director of the Joint Center for Housing Studies. “However, if falling mortgage interest rates continue to incentivize home sales, refinancing, and ultimately remodeling activity, the slowdown may soften some.”
Abbe Will, associate project director in the Remodeling Futures Program at the Center, added,“With the release of new benchmark data from the American Housing Survey, we’ve also lowered our projection for market size about 6% to $323 billion. Spending in 2016 and 2017 was not nearly as robust as expected, growing only 5.4% over these two years compared to 11.9% as estimated.”
LIRA provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters, and is intended to help identify future turning points in the business cycle of the home improvement and repair industry. Originally developed in 2007, the LIRA was re-benchmarked in April 2016 to a broader market measure based on the biennial American Housing Survey.
The LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter’s closing. The next LIRA release date is October 17.
For more information, visit www.jchs.harvard.edu.