In contrast to the new-home building industry, which spiked and then receded in the first quarters of 2010, the Leading Indicator of Remodeling Activity (LIRA) shows that remodeling will continue on the upswing, says Kermit Baker, director of the Remodeling Futures Program at Harvard’s Joint Center for Housing Studies.

Joint Center for Housing Studies of Harvard University

The LIRA, prepared quarterly by the Remodeling Futures Program, estimates national homeowner spending on improvements in the current quarter and three subsequent quarters. LIRA findings are based on eight major indicators that strongly correlate to remodeling spending.

“It looks like spending will pick up on an annual basis at the end of this year and will accelerate as we move through 2011,” Baker says.

However, recent low interest rates on mortgages and other financial products haven’t translated into the level of growth normally seen with such low rates.

“This was a serious downturn,” Baker says. “Households are not convinced we’re in a full-blown recovery. But all the major elements are moving in the right direction.”

—Stacey Freed, senior editor, REMODELING.