Annual gains in remodeling spending are predicted to go negative by the second half of 2020, according to the latest Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies (JCHS) of Harvard University. The second quarter LIRA report suggested a dramatic slowdown in the remodeling market compared to previous reports; however, the most recent release is the first to suggest a decline in annual home improvement and maintenance expenditures. The LIRA projects year-over-year growth in remodeling spending will post a modest decline of 0.3% in the third quarter of 2020, a steep decline from the 4.6% year-over-year growth posted in the third quarter of 2019.
Homeowners are estimated to have spent $326 billion in remodeling in the the previous four quarters and are projected to spend $327 billion annually through in the final quarter of 2019, marking a 4.6% year-over-year increase. Remodeling spending is expected to stagnate before declining in nominal terms after the turn of the new year, with the projected $325 billion in annual spending through the third quarter of 2020, 0.3% lower than the estimated spending from the third quarter of 2019. Today's low mortgage interest rates may help counter some of the stagnation, potentially buoying home improvement expenditure over the coming year, according to Abbe Will, associate project director in the Remodeling Futures Program at the JCHS.
“Continued weakness in existing home sales and new construction will lead to sluggish remodeling activity next year,” says Chris Herbert, managing director of the JCHS. “Slowdowns in other key indicators of improvement spending—project permitting, sales of building materials, and home prices—also suggest the remodeling market may be reaching a turning point.”
The previous LIRA, released in July 2019, predicted year-over-year increases in residential remodeling expenditures would shrink to 0.4% through the second quarter of 2020.
LIRA provides a short-term outlook for national home remodeling spending and is designed to project the annual rate of change in spending for the current quarter and the following four quarters. The next quarterly report will be released in mid-January of 2020.
