Annual gains in remodeling spending are expected to continue a pattern of deceleration through early 2020, according to the latest Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects year-over-year growth in remodeling spending will shrink to 2.6% in the first quarter of 2020, 4.4 percentage points lower than today.
Homeowners are estimated to have spent $339 billion on remodeling in the first quarter of 2019, a 7% increase from a year earlier, and are expected to spend $345 billion in the second quarter, marking a 6.9% year-over-year increase. Spending on remodeling is projected at $347 billion in the first quarter of 2020, only a 2.6% increase from the spending estimated for the first quarter of 2019.
“Cooling house price gains, home sales activity, and remodeling permitting are lowering our expectations for home improvement and repair spending this year and next,” said Chris Herbert, managing director of the Joint Center for Housing Studies. “Yet, more favorable mortgage rates could still give a boost to home sales and refinancing this spring and summer, which could help buoy remodeling activity.”
Weak home building, aging homes, and other factors have contributed to an extended period of "above trend growth" in home improvement and repair spending, Abbe Will, the associate project director in the Remodeling Futures Program at the Joint Center, said. However, Will said growth in remodeling is expected to fall below the historical average of 5% for the first time since 2013 by 2020.
The previous LIRA, released in January 2019, predicted year-over-year increases in residential remodeling expenditures would shrink to 5.1% through the fourth quarter of 2019.
LIRA provides a short-term outlook of national home remodeling spending and is designed to project the annual rate of change in spending for the current quarter and following four quarters. The next quarterly report will be released in mid-July.
