Steep Slowdown Projected in Home Improvements
CAMBRIDGE, MA - 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 today 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 percent in the current quarter to just 0.4 percent 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,” says 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.”
“With the release of new benchmark data from the American Housing Survey, we’ve also lowered our projection for market size about 6 percent to $323 billion,” says Abbe Will, Associate Project Director in the Remodeling Futures Program at the Center. “Spending in 2016 and 2017 was not nearly as robust as expected, growing only 5.4 percent over these two years compared to 11.9 percent as estimated.”
More information about the newly released benchmark data and changes to the projected LIRA market size can be found here.
Click image for full-size chart.
The Leading Indicator of Remodeling Activity (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, 2019.
The Remodeling Futures Program, initiated by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States. The Program seeks to produce a better understanding of the home improvement industry and its relationship to the broader residential construction industry.
The Harvard Joint Center for Housing Studies advances understanding of housing issues and informs policy. Through its research, education, and public outreach programs, the Center helps leaders in government, business, and the civic sectors make decisions that effectively address the needs of cities and communities. Through graduate and executive courses, as well as fellowships and internship opportunities, the Center also trains and inspires the next generation of housing leaders.
Contact: Kerry Donahue, (617) 495-7640, [email protected]