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Harvard’s Educated Guess: Remodeling Market Acceleration Likely

Friday, July 20, 2012

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Home-remodeling activity in the U.S. is in a position to see accelerated growth by the end of this year and into 2013, according to Harvard University’s latest Leading Indicator of Remodeling Activity (LIRA) report.

The indicator estimates that $114.8 billion will be spent on home improvements during the third quarter of 2012, up from $113.6 in the second quarter. The indicator forecasts a larger spending increase to $120.7 for the fourth quarter, and anticipates a jump to $128.9 for the first quarter of 2013 (see chart).

“Warm weather in the first quarter temporarily bumped up remodeling activity in many areas,” said Eric S. Belsky, managing director of the Harvard’s Joint Center for Housing Studies. “By the end of the year, however, positive market fundamentals are expected to kick in, moving the industry out of this ebb and flow period and into a new growth phase.”

Kermit Baker, director of the Remodeling Futures Program at the Joint Center, added that “Home improvement activity has been bouncing around the bottom of this cycle for almost three years now, waiting for the industry to get some traction.”

The Joint Center said improving home sales, lower financing costs and stronger consumer confidence, positive business conditions for contractors are contributing to home-improvement market growth.

More information: www.jchs.harvard.edu/.

The Leading Indicator of Remodeling Activity is designed to estimate national homeowner spending on improvements for the current quarter and the following three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry, the Joint Center for Housing Studies said.

The Joint Center for Housing Studies is Harvard University’s center for information and research on housing in the U.S., and says it provides leaders in government, business, and the non-profit sector with information to develop policies and strategies.