Spending by homeowners on major projects will accelerate through 2014 to the point that we'll end the year with $150.1 billion in spending, up 20.2% from last year's total, the Remodeling Futures Program at Harvard University's Joint Center for Housing Studies forecast today.
The center's LIRA — its Leading Indicator of Remodeling Activity — shows the pace of spending growth, measured in moving four-quarter totals, is accelerating from an 8.8% rose in the first quarter from the opening three months of 2013 from the year-earlier period to a 20.2% rise for the four quarters of this year vs. all of 2012. Total spending, meanwhile, has grown from $114 billion in 2011 to $124.9 billion in 2012 to the expected $150.1 billion in 2013.
LIRA's tracking of homeowner improvements covers major projects, such as kitchen and bath jobs. It excludes minor maintenance expenditures by homeowners as well as all spending on rental housing.
“Existing home sales were up almost 9% last year, and house prices are increasing in most markets across the country,” said Eric S. Belsky, JCHS' managing director, in a news release. “This has increased the home equity levels for most homeowners, encouraging them to reinvest in their homes.”
“The strong growth that we’ve seen recently is putting pressure on the current capacity of the home improvement industry,” said Kermit Baker, director of the Remodeling Futures Program. “Contractors and subcontractors are having more difficulty finding skilled labor, and building materials costs are unusually volatile for this stage of a recovery.” —Craig Webb is the editor-in-chief at REMODELING.
The Leading Indicator of Remodeling Activity (LIRA) estimates the 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. The development of the LIRA is detailed in “Developing a Leading Indicator for the Remodeling Industry” (JCHS Research Note N07-1). In July 2008, the LIRA was re-benchmarked due to changes in the underlying reference series. 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 July. 18, 2013.
The Remodeling Futures Program, initiated by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors that influence the growth and changing characteristics of housing remodeling and repair activity in the U.S.