Owner spending on home improvements will continue to trend down through 2009 and into the first part of next year, according to the Leading Indicator of Remodeling Activity (LIRA), released July 16 by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. With annual declines hovering around 11 percent for the next several quarters, some signs suggest the depressed remodeling market is close to a cyclical bottom.
"Homeowners are still hesitant to undertake major remodeling projects," says Nicolas P. Retsinas, director of the Joint Center for Housing Studies. "While the pace of decline is moderating, increased remodeling activity will not materialize until further signs of recovery emerge in the broader housing market."
A few components of the LIRA point to renewed strength in the industry, though the overall outlook going into 2010 is still bleak.
"There are some positive developments for the remodeling industry, such as low financing costs for home improvement projects and rising home sales in a growing number of markets," says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies. "Weak home prices and decreased cost recovery for most types of remodeling projects, however, discourage owners from pursuing typical upper-end improvements."
The Leading Indicator of Remodeling Activity is designed to estimate national homeowner spending on improvements for the current quarter and subsequent 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 LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter's closing. The next LIRA release date is Oct. 15.
The Joint Center for Housing Studies is Harvard's center for information and research on housing in the United States. Established in 1959, it is a collaborative unit affiliated with the Graduate School of Design and the Kennedy School of Government.
For information, visit www.jchs.harvard.edu.