Remodeling Market Expected to Stall in 2020
Wednesday, October 23, 2019
Annual gains in homeowner spending for improvements and repairs are set to give out by the second half 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 home improvement and maintenance expenditures will post a modest decline of 0.3 percent through the third quarter of 2020.
“Continued weakness in existing home sales and new construction will lead to sluggish remodeling activity next year,” says Chris Herbert, Managing director of the Joint Center for Housing Studies. “Slowdowns in other key indicators of improvement spending—project permitting, sales of building materials, and home prices—also suggest the remodeling market may be reaching a turning point.”
“At $325 billion, owner improvement and repair spending in the coming year is expected to essentially remain flat compared to market spending of $326 billion over the past four quarters,” says Abbe Will, Associate Project director in the Remodeling Futures Program at the Center. “However, today’s low mortgage interest rates may help counter some of these headwinds, which could buoy home improvement expenditure over the coming year.”
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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 January 16, 2020.
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.