Remodeling activity in the U.S. is likely to see accelerated growth for the rest of 2012 and well into 2013, 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.
This positive outlook is largely due to the uptick in home sales as well as a sunnier future for many U.S. contractors. The LIRA predicts that U.S. remodeling activity will increase by 12.2% to $128.9 billion by Q1 2013, more than doubling the predicted Q4 2012 growth of 5.9% at $120.7 billion.
“It looks like we’re finally starting to see some improvement in the residential sector of the economy and that’s going to spillover to remodeling fairly soon,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “We think we’re going to see market improvement by the fourth quarter of this year and strengthening as we move into the first quarter of next year.”
Ebb & Flow
There have not been abundant gains since the market hit its low in the 2009–2010 time frame, Baker says, causing most remodelers to have seen a bit of an ebb and flow of business conditions over the last couple of years. “It looks like finally we’re seeing enough momentum behind the residential sector that we’re going to pick up off of that base and move into some reasonably healthy growth,” he says, adding that with the solid, single-digit number gains in the market this year, there is the potential for double-digit gains next year “as long as we don’t have any setbacks in the economy.”
Despite the current obsession with the upcoming presidential election, Baker feels that it will have very little, if any, impact on the economic outlook regardless of the election outcome. “I don’t see a dramatic influence of the election on the industry,” he says. “I think there’s a certain amount of the ‘let’s sit tight’ attitude but that’s more with businesses than homeowners.”
An added positive may take place in the election’s aftermath since it will give businesses one less excuse in delaying decisions that they would have otherwise made. “We have a divided government now; we’ll have a divided government after the election,” Baker says. “I don’t think there’s going to be a lot of dramatic changes, but it will remove that one piece of uncertainty that will allow folks to move ahead with their plans.” —Mark A. Newman, senior editor, REMODELING.
About the LIRA
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 is measured as an annual rate-of-change of its components and provides a short-term outlook of homeowner remodeling activity. It is intended to help identify future turning points in the business cycle of the home improvement industry. Read more about the development of the LIRA. (In July 2008, the LIRA was re-benchmarked.)
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 Oct. 18, 2012.
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 U.S. 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.