Pandemic to Weigh on Home Remodeling Spending Through Mid-Year 2021

Thursday, July 16, 2020 | Abbe Will

Expenditures for improvements and repairs to owner-occupied homes are expected to slow by the middle of next year as the COVID-19 pandemic continues to unfold, according to our latest Leading Indicator of Remodeling Activity (LIRA). Assuming continued weakness in the broader economy due to the public health crisis, the LIRA projects annual declines in renovation and repair spending of 0.4 percent by the second quarter of 2021. With the unprecedented changes to the US economy since mid-March, the Remodeling Futures Program is again providing this downside range for the home remodeling outlook, which incorporates forecasts for several core model inputs: retail sales of building materials, home prices, and GDP. In contrast, the LIRA’s standard methodology, which does not include forecasted trends, would have called for increasing remodeling activity through the start of next year.

The remodeling market was buoyed through the early months of the pandemic as owners spent a considerable amount of time at home and realized the need to update or reconfigure indoor and outdoor spaces for work, school, play, exercise, and more. However, sharp declines in home sales and project permitting activity this spring, as well as record unemployment, suggest many homeowners will likely scale back plans for major renovations this year and next.

As the pace of do-it-yourself activity, maintenance work, and exterior-focused projects begins to taper, annual expenditures by owners for home improvements and repairs are expected to shrink slightly to $326 billion by the middle of 2021. Given the ongoing uncertainty surrounding the broader impact of the pandemic, the timing on when we’ll reach a bottom in the remodeling market also remains unclear.

Column and line chart providing quarterly historical estimates and projections of homeowner improvement and repair spending from 2017-Q4 to 2021-Q2 as four-quarter moving sums and rates of change. Year-over-year spending growth ranged from 6.0-7.0% through 2019-Q2. The standard methodology projects a steady deceleration of spending growth to 1.5% by 2020-Q3 before rebounding to 4.2% growth in 2021-Q1 and then slowing again to 1.5% in 2021-Q2. The downside projection shows a similar trend but at lower rates with annual spending rates rebounding to 2.1% in 2020-Q1 and then falling to -0.4% in 2020-Q2. Under this scenario, annual spending levels are expected to decrease from $328 billion in 2020-Q2 to $326 billion in 2021-Q2.

For more information, visit the LIRA page of our website.

Read More About: Remodeling
Abbe Will

Abbe Will

Research Associate & Associate Project Director, Remodeling Futures

Abbe Will manages and contributes research to the Improving America’s Housing report and research brief series and administers the quarterly Leading Indicator of Remodeling Activity (LIRA)....

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