Over the coming year, homeowner remodeling activity is projected to accelerate, keeping the rate of growth above its long-term trend, 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 anticipates growth in home improvement and repair expenditures will reach 8.0% by the start of 2017, well in excess of its 4.9% historical average.
“A healthier housing market, with rising house prices and increased sales activity, should translate into bigger gains for remodeling this year and next,” says Chris Herbert, managing director of the Joint Center. “As more homeowners are enticed to list their properties, we can expect increased remodeling and repair in preparation for sales, coupled with spending by the new owners who are looking to customize their homes to fit their needs.”
“By the middle of next year, the national remodeling market should be very close to a full recovery from its worst downturn on record,” says Abbe Will, research analyst in the Remodeling Futures Program at the Joint Center. “Annual spending is set to reach $321 billion by then, which after adjusting for inflation is just shy of the previous peak set in 2006 before the housing crash.”
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.
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.