Boom in Home Remodeling May Peak in 2022, Says Harvard
Spending for home improvements and repairs is expected to expand at a stronger pace in 2022, but signs point to some easing of growth by year end, according to the latest Leading Indicator of Remodeling Activity (LIRA) from the Joint Center for Housing Studies of Harvard University. The LIRA projects double-digit gains in annual homeowner renovation and maintenance expenditure will top out in the third quarter of 2022 before beginning a deceleration toward more sustainable rates of growth.
Strong increases in home sales activity, household incomes and home equity levels are supporting a faster expansion of the home remodeling market over the coming year. As owners continue to navigate the ups and downs of the pandemic’s trajectory, the focus on home improvements for changing wants and needs remains in sharp relief.
While annual owner improvement and repair spending could reach $430 billion by the second half of 2022, several headwinds may still temper growth expectations this year. The rising costs of labor and construction materials, difficulty retaining contractors, and climbing interest rates could discourage owners from undertaking new or larger remodeling projects.
The prior two LIRA releases reported spending projections using a smoothing technique to adjust for the immense growth rate volatility in several leading model inputs, which was largely an artifact of year-over-year comparisons to pandemic-induced lows. As these shocks recede further in the past and inputs begin to stabilize, the Remodeling Futures Program is reverting to its standard methods for projecting homeowner improvement and repair spending with this release. The result of this change is somewhat higher growth rate projections than previously reported.