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Renovation Spending Continues to Grow, But More Slowly

The LIRA projects that annual growth in home improvement and repair expenditure this year will remain above its long-term trend.

Strong gains in home remodeling and repair activity are expected to ease moving into next year, according to the Leading Indicator of Remodeling Activity (LIRA) recently released 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 expenditure this year will remain above its long-term trend of 5%, but will decline steadily from 7.3% in the first quarter to 6.1% by the first quarter of 2018.

“Homeowners are continuing to spend more on improvements as house prices strengthen in most parts of the country,” says Chris Herbert, managing director of the Joint Center for Housing Studies. “Yet, recent slowdowns in home sales activity and remodeling permitting suggests improvement spending gains will lose some steam over the course of the year.”

“The remodeling market is approaching a cyclical slowdown after several years of steady recovery,” says Abbe Will, Research Analyst in the Remodeling Futures Program at the Joint Center. “While the rate of growth is starting to trend down, national remodeling expenditures by homeowners are projected to reach almost $320 billion by early next year.”

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 20, 2017.

 

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