Residential Remodeling to Continue a Steady Expansion
Moderate gains in homeowner spending for improvements and repairs are expected through much of next year as initial concerns of a possible pandemic-induced downturn have largely dissipated, 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. With greater clarity about the pandemic’s impact on the US economy and given the surprising resilience of housing markets, the Remodeling Futures Program is no longer providing a downside range for its home remodeling outlook. The LIRA’s standard methodology projects annual growth in renovation and repair spending of 4.1 percent by the first quarter of 2021 with gains softening to 1.7 percent by the third quarter.
“The remodeling market is bouncing back from the initial shocks caused by the pandemic, as homeowners continue to spend significant time in their home and are adapting it for work, school, and leisure,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “The surge in DIY and small project activity is lifting the remodeling market, but it remains to be seen if the strong sales market this summer translates into larger improvements that would drive even stronger growth in the coming quarters.”
“Annual expenditures for renovation and repair of the owner-occupied housing stock are expected to rise from about $332 billion today to $337 billion by the latter half of 2021,” says Abbe Will, Associate Project Director in the Remodeling Futures Program at the Center. “While a softening of growth is projected in 2021, recent strengthening of home prices and sales activity—including second home purchases—could provide further boosts to remodeling and repair 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 January 21, 2021.
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.
About the Harvard Joint Center of Housing Studies
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 Center also trains and inspires the next generation of housing leaders.
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Source: Harvard Joint Center for Housing Studies