Homeowners spent approximately $168.7 billion on home improvements and repairs in 2006, according to the latest Remodeling Activity Indicator (RAI).

It's the biggest-ever calendar year for the remodeling industry, although not the largest four-quarter period. But it's just a 1.5% increase over 2005, which is the lowest four-quarter growth rate since the first quarter of 2003.

That's the effect of a slumping new-home market. The good news is that remodeling isn't likely to suffer as much as new-home sales have. “Historically, remodeling hasn't been as cyclical as new construction,” says Kermit Baker, director of the Remodeling Futures program at the Joint Center for Housing Studies at Harvard University (JCHS), which derives the RAI. Baker explains that certain aspects of remodeling, such as repair and exterior replacement, are not deferrable, and that the dearth of spec remodeling prevents a buildup of inventory — two problems currently plaguing the new-home market. In a press release announcing the new RAI, Baker said that “once home sales and prices begin to stabilize, owners will resume their home improvement plans.”

Joint Center for Housing Studies at Harvard University