The third-quarter 2007 release of the Leading Indicator for Remodeling Activity (LIRA) brings more doom and gloom. The annual rate of consumer spending on remodeling, having fallen each of the past two quarters, is expected to continue to drop for the next four quarters.

Source: Joint Center for Housing Studies The LIRA, published by the Joint Center for Housing Studies (JCHS) at Harvard University, projects four quarters in advance and is currently predicting that the third quarter of 2008 will be the worst thus far, with an annual decline of 2.6%. This is subject to revision, however, as more current data becomes available, and it's worth noting that recent LIRA projections have proven slightly pessimistic in the final analysis. For example, last quarter, the projection for this quarter was for a 1.4% decrease in spending; now that we have preliminary data for that quarter, the decline is just 0.4%.

Citing slow home sales and sinking home values for the remodeling downturn, JCHS officials were cautiously optimistic, however, that even though the industry had yet to hit bottom, it wouldn't be that bad once it did. Kermit Baker, director of the Remodeling Futures program at JCHS, said, “Absent a more serious national downturn, remodeling activity is expected to see only modest declines in 2008.”

Figure This

Amount by which foreclosures increased in 2007 over 2006; more than 1% of all U.S. households were in some state of foreclosure last year
Source: RealtyTrac

New-home sales in 2007, down from 1.05 million in 2006; the 26% drop is the biggest since 1963, when the government began keeping records of this data
Source: U.S. Census Bureau

Median price of all homes sold in 2007, a drop of 1.3% — the first price decrease on record
Source: National Association of Realtors