Home Remodeling Spending Set to Accelerate
An improving housing market and record low interest rates are driving projections of strong gains in home improvement activity through the end of the year and into the first half of 2013, according to the Leading Indicator of Remodeling Activity (LIRA) released recently by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA suggests that the seeds for what appears to be a very robust remodeling recovery have been planted, with annual homeowner improvement spending expected to reach double-digit growth in the first half of 2013.
“After a bump in home improvement activity during the mild winter, there was a bit of a pause this summer,” says Eric S. Belsky, managing director of the Joint Center. “However, the LIRA is projecting an acceleration in market activity beginning this quarter, and strengthening as we move into the new year.”
“Strong growth in sales of existing homes and housing starts, coupled with historically low financing costs, have typically been associated with an upturn in home remodeling activity some months later,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “While the housing market has faced some unique challenges in recent years, this combination is expected to produce a favorable outlook for home improvement spending over the coming months."
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 development of the LIRA is detailed in “Developing a Leading Indicator for the Remodeling Industry” (JCHS Research Note N07-1). In July 2008, the LIRA was re-benchmarked due to changes in the underlying reference series. These changes are explained in “Addendum to Research Note N07-1: Re-Benchmarking the Leading Indicator of Remodeling Activity” (JCHS Research Note N08-1). 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 17, 2013.
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. For more information, please visit www.jchs.harvard.edu.