Weakness in the residential remodeling market is projected to translate to decreases in spending by the first quarter of 2024, according to the latest Leading Indicator of Remodeling Activity (LIRA) from the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University (JCHS).
Annual spending for improvements and repairs on homes is expected to decrease by 2.7% through the first quarter of 2024, 6.3% through the second quarter, and 7.7% through the third quarter.
“The ongoing weakness in the housing market caused by high interest rates and low supply of existing homes is expected to weigh on remodeling activity next year,” says Carlos Martín, project director of the Remodeling Futures Program. “Homeowner concerns about the health and direction of the broader economy may also dampen plans for remodeling.”
Annual owner expenditures on remodeling are projected to remain positive through the end of 2023, before turning negative in 2024. After increasing since the fourth quarter of 2020, the aggregate level of annual spending on improvements and repairs are estimated to have peaked in the third quarter of 2023. The JCHS anticipates aggregate spending will decrease on an annual basis through the third quarter of 2023.
“The level of annual spending on improvements and repair is projected to fall from $489 billion today to $452 billion over the coming four quarters,” says Abbe Will, associate project director for the Remodeling Futures Program. “While the rate of market decline should decelerate significantly in the second part of the year, 2024 is shaping up to be a challenging year for home remodeling.”
The LIRA, which is measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and the following four quarters. The indicator is intended to help identify future turning points in the business cycle of the home improvement and repair industry. The indicator is benchmarked to national spending estimates from the U.S. Department of Housing and Urban Development’s American Housing Survey (AHS) and was re-benchmarked in April 2016 to a broader market measure based on the AHS. The next quarterly LIRA report will be released in January of 2024.