Report: Remodeling Spending Increasing Into 2016

By / 1 year ago

LIRA_Leading Indicator of Remodeling Activity

After several quarters of slackening growth, home improvement spending is projected to pick-up pace moving into next year, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual spending growth for home improvements will accelerate from 2.4% last quarter to 6.8% in the second quarter of 2016.

“Home improvement spending continues to benefit from the last years’ upswing in housing market conditions including new construction, price gains, and sales,” says Chris Herbert, Managing Director of the Joint Center. “Strengthening housing market conditions are encouraging owners to invest in more discretionary home improvements, such as kitchen and bath remodeling and room additions, in addition to the necessary replacements of worn components, such as roofing and siding.”

“Although we expect remodeling activity to strengthen through the first half of 2016, further gains could be tempered,” says Abbe Will, a research analyst in the Remodeling Futures Program at the Joint Center. “Current slowdowns in shipments of building materials and remodeling contractor employment trends, as well as restrictive consumer lending environments, are lowering remodeler sentiment and could keep spending gains in the mid-single digit range moving forward.”

The Leading Indicator of Remodeling Activity (LIRA) 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 development of the LIRA is detailed in “Developing a Leading Indicator for the Remodeling Industry” (JCHS Research Note N07-1). In July 2008, the LIRA was re-benchmarked due to changes in the underlying reference series. These changes are explained in “Addendum to Research Note N07-1: Re-Benchmarking the Leading Indicator of Remodeling Activity” (JCHS Research Note N08-1). Beginning with the first quarter 2014 release, long-term interest rates were removed from the LIRA estimation model. For more information on the reasons for and implications of this change, please visit our blog.

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 January 21, 2016.

The Remodeling Futures Program, initiated by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States. The Program seeks to produce a better understanding of the home improvement industry and its relationship to the broader residential construction industry.

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