Study: Major metro remodeling markets projected to heat up
Annual growth in home improvement spending is expected to be widespread across the country’s largest metropolitan areas in 2018, according to a new model developed by the Remodeling Futures Program at the Joint Center. The model, described in a new research note, produces short-term projections of remodeling activity for 50 major metropolitan areas. The development of the model utilized two decades of home improvement spending in several of the nation’s largest metro areas as benchmark data.
The Joint Center projects that improvement spending by homeowners will increase in all 50 metros this year, and increase by at least 5% in 41 of the 50 metros. Moreover, the Joint Center projects that annual spending will grow by 10% or more in 11 of these major metros, led by Kansas City, Charlotte, San Antonio, Dallas, and Sacramento.
These projections mirror the national projections from the Remodeling Futures’ quarterly Leading Indicator of Remodeling Activity (LIRA), which predicts that national spending on remodeling will grow by over 7% in 2018. The metro projections suggest that the national increase is likely to be broad-based, rather than being concentrated in any one area of the country.
These new metro-level projections draw on over a year of research into what drives homeowner remodeling activity at the local level, an effort that relied on home improvement data from 1995-2015 in the Detroit, Chicago, Los Angeles, and Philadelphia metro areas. As the research note explains, about two-thirds of the variation in these metros’ historical growth rates is closely correlated with such factors as gains in local home prices, home sales activity, housing starts, retail sales of building materials, and remodeling permitting activity. Importantly, changes in these inputs also tend to lead remodeling activity by several quarters. Drawing on these findings, we developed a model to predict spending patterns in any metro for which we had reliable data on these inputs.