GROWTH IN REMODELING SPENDING PROJECTED TO PEAK IN 2017
Cambridge, MA – Strong gains in home renovation and repair spending are expected to continue into next year before tapering, 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 growth in home improvement and repair expenditures will continue to increase, surpassing eight percent by the second quarter of 2017 before moderating somewhat later in the year.
“Homeowner remodeling activity continues to be encouraged by rising home values and tightening for-sale inventories in many markets across the country,” says Chris Herbert, Managing Director of the Joint Center. “Yet, a recent slowdown in the expansion of single family homebuilding and existing home sales could pull remodeling growth off its peak by the second half of 2017.”
“Even as remodeling growth trends back down, levels of spending are expected to reach new highs by the third quarter of next year,” says Abbe Will, Research Analyst in the Remodeling Futures Program at the Joint Center. “At $327 billion annually, the homeowner improvement and repair market will surpass its previous inflation-adjusted peak from 2006.”
Due to rise in the costs, the sales of items that can provide alternate to expensive items used in remodeling or renovation are also expected to rise. For instance, people interested in masonry veneer may turn to get the faux brick walls developed instead.
NOTE ON LIRA MODEL: As of April 21, 2016, the LIRA has undergone a major re-benchmarking and recalculation in order to better forecast a broader segment of the national residential remodeling market. For more information on this, see our blog, and read the research note: Re-Benchmarking the Leading Indicator of Remodeling Activity.
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. An explanation of this re-benchmarking and recalculation of the LIRA model is provided in “Re-Benchmarking the Leading Indicator of Remodeling Activity.”
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 19, 2017.
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.