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Housing Perspectives

Research, trends, and perspective from the Harvard Joint Center for Housing Studies

Red Hot Remodeling Growth Expected to Ease into 2023

Expenditures for improvements and repairs to the owner-occupied housing stock are expected to grow throughout 2022 and into early next year, but at a decelerating pace, according to our latest Leading Indicator of Remodeling Activity (LIRA). The LIRA projects year-over-year increases in residential renovation and maintenance spending will peak at 19.7 percent in the third quarter of this year before sliding downward to 15.1 percent in the first quarter of 2023.

Massive increases in house price appreciation and the resulting levels of tappable home equity will continue to support remodeling activity this year and into next. Many other market indicators including existing home sales, renovation permitting, and retail sales of building materials also continue to grow at high, albeit slowing, rates.

The level of annual expenditures for home improvements and repairs is set to expand to nearly $450 billion by the first quarter of 2023. Yet, the rising costs of project financing, construction materials, and labor, as well as growing concerns about a broader economic slowdown or recession may further slow remodeling growth.

Column and line chart providing quarterly historical estimates and projections of homeowner improvement and repair spending from 2019-Q4 to 2023-Q1 as four-quarter moving sums and rates of change. Year-over-year spending growth held steady at 1-3% from 2019-Q4 to 2020-Q4 followed by a gradual acceleration to 11.5% in 2022-Q1; growth is projected to accelerate faster to a peak of 19.7% through 2022-Q3 before softening to 15.1% in 2023-Q1. Annual spending levels are expected to increase from $391 billion through 2022-Q1 to $449 billion through 2023-Q1.

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