Growing Home Sales Expected to Fuel Remodeling

Home remodeling is expected to soon kick back into gear.  LIRA, the Leading Indicator of RemodelingrnActivity produced by the Joint Center for Housing Studies at Harvard Universityrnis projecting that annualrnspending growth for home improvements will accelerate to 4.0% by the firstrnquarter of 2016.</p

LIRA is designed tornestimate national homeowner spending on improvements for the current quarterrnand subsequent three quarters. The indicator, measured as an annualrnrate-of-change of its components, provides a short-term outlook of homeownerrnremodeling activity and is intended to help identify future turning points inrnthe business cycle of the home improvement industry. </p

Expenditures on remodeling reached a recent peak of $146.0rnbillion in the third quarter of 2014 but declined over the following twornquarters to an estimated $140.0 billion in the first quarter of this year.  Second quarter totals were estimated at 144.7rnbillion.  For the upcoming three quartersrnLIRA estimates the moving average will change by 3.5, 2.9 and 4.0 percentrnrespectively. </p

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“A major driver of thernanticipated growth in remodeling spending is the recent pick up in home salesrnactivity,” says Chris Herbert, Managing Director of the Joint Center. rn”Recent homebuyers typically spend about a third more on home improvements thanrnnon-movers, even after controlling for any age or income differences, sornincreasing sales this year should translate to stronger improvement spendingrngains next year.” </p

“Other signals ofrnstrengthening remodeling activity include sustained growth in retail sales ofrnhome improvement products and ongoing gains in house prices across much of therncountry,” says Abbe Will, a research analyst in the Remodeling Futures Programrnat the Joint Center.  “Rising home prices means rising home equity, whichrnshould encourage improvement spending by a growing number of owners.”

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