As the broader housing market continues its sluggish recovery, growth in home improvement spending is also expected to soften throughout the coming 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 annual growth in home improvement spending will decelerate from 6.3% in the first quarter of 2015 to 1.6% by the third quarter.
“Due in part to weakening home sales last year, growth in remodeling spending is expected to deflate somewhat in 2015,” says Chris Herbert, managing director of the Joint Center. “Homeownership rates continue to slide as lending remains tight and first-time homebuyers are not yet returning to the market.”
“Although contractor sentiment has cooled in recent quarters, it remains favorable overall,” says Abbe Will, a research analyst in the Remodeling Futures Program at the Joint Center. “House price gains are moderating but still strong and home sales appear to be turning a corner now, all of which bodes well for continued, if more moderate, home improvement gains for 2015.”
The 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. The next LIRA release date is April 16, 2015.
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.