Hang in there, remodelers.

Weak home prices and decreased returns on remodeling investments will continue to discourage large-scale remodeling projects through 2009 and into 2010, according to the most recent Leading Indicator of Remodeling Activity (LIRA). But the report, released last week, indicates that the pace of decline in remodeling spending is moderating, and it points to some bright spots as well.

“There are some positive developments for the remodeling industry, such as low financing costs for home improvement projects and rising home sales in a growing number of markets,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, which issues the report.

Click here to see the JCHS press release and the LIRA chart.

Industry trade groups are not surprised by the second-quarter LIRA. “Its core message is consistent with what we hear from NARI members,” says Mary Harris, executive director of the National Association of the Remodeling Industry. “While many members are reporting that their phones are ringing more, customers are still cautious” and more inclined to price-shop via multiple bids. “Jobs are notably smaller and credit is still tight.”

However, Harris notes, “there is optimism in ringing phones.”

Therese Crahan, executive director of NAHB Remodelers, is hearing similar anecdotal reports: Phones are ringing more, but the jobs are smaller. Also, bidding is back – even among remodelers that previously avoided bidding on projects.

LIRA is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. Measured as an annual rate-of-change of its components, LIRA provides a short-term outlook of residential remodeling activity and predicts potential turning points in the home improvement business cycle.

Click here to see the JCHS press release and the LIRA chart.

To see Remodeling’s analysis of previous LIRA reports, click here.