leading indicator

Home Improvement Spending Continues Toward More Moderate Growth

The LIRA projects annual growth in home improvement spending to ease to 3.1% through the second quarter of 2015.

Reflecting the slow pace of recovery in the overall housing market, the home remodeling industry is expected to continue its path of moderating growth, according to the Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual growth in home improvement spending to ease to 3.1% through the second quarter of 2015.

“Stronger gains in remodeling activity are unlikely given the recent slowdowns we’ve seen in housing starts, sales, and house price gains,” says Chris Herbert, acting managing director of the Joint Center. “While the continued recovery in employment should ultimately keep the market on an upward trajectory, remodeling is likely to see slower growth rates moving into 2015.”

“Growth in home remodeling activity continues to hover around its longer-term average of mid-single digit gains,” says Abbe Will, a research analyst in the Remodeling Futures Program at the Joint Center. “Even though the housing market overall has been lackluster, many areas of the country remain economically healthy and remodeling contractor sentiment remains high.”

NOTE ON LIRA MODEL:  An important change was made to the LIRA estimation model beginning with the first quarter 2014 release. With the upheaval in financial markets in recent years, the traditional relationship between interest rates and home improvement spending has significantly deteriorated. As a result, long-term interest rates have been removed from the LIRA estimation model.  For more information on the implications of this change, please read the blog post from April.

The Leading Indicator of Remodeling Activity (LIRA) is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry. 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.

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