Below-Average Growth in Home Remodeling Expected by 2020
Tuesday, April 23, 2019
Annual gains in improvement and repair spending on the owner-occupied housing stock are projected to continue decelerating through early 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 forecasts that year-over-year growth in homeowner remodeling expenditure will slow from about 7% today to 2.6% by the first quarter of 2020. “Cooling house price gains, home sales activity, and remodeling permitting are lowering our expectations for home improvement and repair spending this year and next,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “Yet, more favorable mortgage rates could still give a boost to home sales and refinancing this spring and summer, which could help buoy remodeling activity.” “Home improvement and repair spending has been in an extended period of above trend growth for several years, due to weak homebuilding, aging homes, and other factors,” says Abbe Will, Associate Project Director in the Remodeling Futures Program at the Center. “However, growth in remodeling is expected to fall below the market’s historical average of 5% for the first time since 2013.”
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 July 18, 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 Joint Center also trains and inspires the next generation of housing leaders.