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, owner home improvement spending will continue to trend down through 2009 and into the first part of next year. However, the silver lining is that with annual declines hovering around 11 percent for the next several quarters, some signs suggest the depressed remodeling market is close to a cyclical bottom.
“Homeowners are still hesitant to undertake major remodeling projects. While the pace of decline is moderating, increased remodeling activity will not materialize until further signs of recovery emerge in the broader housing market,” says Nicolas P. Retsinas, director of the Joint Center for Housing Studies.
From what we’ve seen locally, this is puzzling, since many whom we interact with are opting for home improvements and renovations in favor of selling and moving. When your house isn’t worth much on the market (relatively speaking) homeowners tend to buckle down and home improvement spending increases so they can avoid moving.
A few components of the LIRA point to renewed strength in the industry, though the overall outlook going into 2010 is still bleak. Low financing costs for home improvement projects and government rebates for energy improvement are contributing to some of the gains. On the other hand, weak home prices and decreased cost recovery for most types of remodeling projects, however, appear to be discouraging owners from pursuing more costly improvements.
Click here to download historical data of home improvement spending
The LIRA is designed to estimate national home improvement spending by homeowners 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. In July 2008, the LIRA was re-benchmarked due to changes in the underlying reference series. The next LIRA release date is October 15, 2009.
For more information you can visit www.jchs.havard.edu.
