Strong Remodel Pace May Slow in 2015

CAMBRIDGE, Mass. – Growth in home improvement activity is expected to peak during the second half of 2014 and then begin to ease heading into next year, according to data from the Joint Center for Housing Studies of Harvard University.

Click to enlarge chartThe Leading Indicator of Remodeling Activity (LIRA), released this week by the Remodeling Futures Program, projects 2014 annual gains in home improvement spending of 9.9%, with annual growth slowing to 7.0% in the first quarter of 2015.

The projection comes after revised estimates from the U.S. Census Bureau show the home improvement market growing 5.6% last year.

“With the economy improving slower than expected and home sales struggling to keep up with last year’s pace, the recent strong gains in remodeling spending will likely moderate later this year,” says Chris Herbert, research director at the Joint Center. “Although this presents a challenge for the remodeling industry, the LIRA continues to project significant growth going into 2015.”

“Despite some headwinds, there continue to be promising signs for remodeling,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “Remodeling contractor sentiment remains positive and house prices continue to rise in most areas of the country.”

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.

The tracking of remodeling activity and purchases of materials doesn’t specifically include countertops and other areas for hard surfaces. However it does help identify future turning points in the business cycle of the overall home-improvement industry.

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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