Harvard: Remodeling Boom Seen into 2013

by devteam October 18th, 2012 | Share

The Harvard Joint Center for HousingrnStudies is predicting strong gains in remodeling and home improvement activityrnover the rest of 2012 and the first half of next year.  The Center’s Leading Indicator of RemodelingrnActivity (LIRA) suggests that the seeds of a recovery in the remodelingrnindustry have been planted and there could be double digit growth in homernimprovement spending over the next eight months. </p

LIRA is designedrnto estimate home improvement spending for the current quarter and the followingrnthree quarters using the Department of Commerce’s Value of Construction Put in Places series or C-30 to project thernvalue of residential improvements.  This annual or moving four-quarter rate of change comparesrntotal spending in any given four-quarter period to the total spending thatrnoccurred in the four quarters prior to that period.  </p


The LIRA projections can be found inrnthe line graph for the last four quarters of the chart. Since the LIRA isrndesigned as a forward-looking indicator, all of the historical data in thernchart comes directly from estimates of improvement spending in the C-30 series.</p

Commerce definesrnhome improvements as remodeling, additions, and major replacements tornowner-occupied properties after the completion of the original building.  This definition include additions to existingrnbuildings, finishing basements and attics, improvements to the exteriorrnbuilding or lot, and replacement of major systems and equipment such asrnfurnaces or water heaters.  It does not includernspending for painting, landscaping, or routine maintenance. </p

“After a bump in home improvement activityrnduring the mild winter, there was a bit of a pause this summer,” says Eric S.rnBelsky, managing director of the Joint Center.  “However, the LIRA isrnprojecting an acceleration in market activity beginning this quarter, andrnstrengthening as we move into the new year.<br /<br /"Strong growth in sales of existing homes and housing starts, coupled withrnhistorically low financing costs, have typically been associated with an upturnrnin home remodeling activity some months later," says Kermit Baker, director ofrnthe Remodeling Futures Program at the Joint Center.  "While the housingrnmarket has faced some unique challenges in recent years, this combination isrnexpected to produce a favorable outlook for home improvement spending over therncoming months."

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