Remodeling Poised to Strengthen Further, says Harvard
Annual gains in homeowner improvement and maintenance spending are set to accelerate in the second half of the year and remain elevated through mid-year 2022, according to the Leading Indicator of Remodeling Activity by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual growth in home renovation and repair expenditures will reach 8.6 percent by the second quarter of next year.
“Home remodeling will likely grow at a faster pace given the ongoing strength of home sales, house price appreciation and new residential construction activity,” says Chris Herbert, managing director of the JCHS. “A significant rise in permits for home improvements also indicates that owners are continuing to invest in bigger discretionary and replacement projects.”
“Larger gains in retail sales of building materials suggest the remodeling market continues to be lifted by DIY activity as well,” says Abbe Will, associate project director in the Remodeling Futures Program at the Center. “By the middle of next year, annual remodeling expenditures to owner-occupied homes are expected to surpass $380 billion.”
A year after the changes to the U.S. economy brought on by the pandemic, many economic indicators are showing extreme percent changes from pandemic-induced lows. To reduce the immense growth rate volatility generated by these year-over-year comparisons, the projection for 2022-Q2 utilizes smoothed data for two leading model inputs: residential remodeling permits and single-family housing starts. Using unsmoothed inputs in the LIRA model would have projected an unlikely annual growth rate roughly twice as large as reported. The Remodeling Futures Program will continue to monitor input volatility.