After spending the past two years at record low levels, remodeling activity is expected to pick up later this year, according to the Leading Indicator of Remodeling Activity (LIRA) released Thursday by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. Owing to a number of factors such as an upturn in home sales, relatively low interest rates, and an unseasonably mild winter, LIRA projects annual spending will see a healthy uptick in 2012, ending the year up 5.9%.

The unusually warm winter in certain parts of the country accelerated the pace of homebuilding and home improvement activity, according to Kermit Baker, director of the Remodeling Futures Program at the Joint Center. While that may produce a pause in remodeling this quarter, a rebounding economy should provide continued growth for the rest of year.

Stacey Freed, circa 2012
 
Credit: Stacey Freed Stacey Freed, circa 2012  

LIRA is computed by looking at a number of indicators traditionally associated with home improvement activity, Baker told REMODELING, adding that existing home sales is one such indicator. “That means that if people are buying homes now, in a few months they are most likely going to spend some money to fix it up,” he says. “Housing starts, while not directly related to home improvement, are driven by the same forces such as improving consumer confidence and the improving employment outlook.” Baker went on to explain that since those indicators have shown steady albeit slow improvement, it implies that there will be some acceleration in the second half of the year for home improvement spending, particularly the fourth quarter. So what does this mean for remodelers? It means they should probably dust off their marketing materials, according to Baker. “Most remodelers went through two or three tough years and now things are bouncing around the bottom,” he says. “It looks like this cyclical upturn is finally beginning to kick in a little bit and we should see more activity towards the end of the year and we may see a slightly different product mix.”

According to Baker, the project areas that were hit the hardest in recent years were discretionary projects, particularly the higher end items like kitchen and bath remodels and room additions. “While our leading indicator doesn’t give details about types of projects, if we do see gains a lot of them will come in that category so remodelers might find projects in a slightly higher price point or in households who are wanting to enhance their use of home.”

The projects that have had the most stability in the last few years have been replacement projects like windows, siding, systems upgrades, roofs, and the like, Baker noted. “It’s been a long struggle in the industry and a lot of competition from the building side so it’s been tough for remodelers for the last few years,” he says.

Very few remodeling pros would disagree.

For more information, please visit www.jchs.harvard.edu.