Homeowners are poised to embark on a remodeling spree this year, according to a recent report released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in Cambridge, Mass.
The metric, known as the Leading Indicator of Remodeling Activity, or LIRA, predicted double-digit gains in spending for home improvement projects in the first half of 2014 and slightly slower increases by the third quarter.
Housing activity rises
In a statement, Eric S. Belsky, managing director of the Joint Center, said growth in home prices, housing starts and existing home sales was also reflected in home improvement activity.
“As owners gain more confidence in the housing market,” Belsky said, “they’re likely to undertake home improvements that they’ve deferred.”
Kermit Baker, director of the Remodeling Futures Program at the Joint Center, added that the strong growth might start to ebb around the middle of the year.
“By that time,” Baker said, “we’ll be approaching the pre-recessionary levels of spending, and with borrowing costs starting to creep back up, growth rates are likely to slow some.”
Remodeling indicators
LIRA is designed to estimate how much homeowners nationally are likely to spend for home improvements in the current quarter and next three quarters, the Joint Center explained. As such, it provides a short-term outlook of homeowner remodeling activity that can help contractors, suppliers and retailers identify business cycle turning points.
Eight indicators are baked into the LIRA model. The indicators are released by the Federal Reserve, U.S. Census Bureau, Bureau of Labor Statistics, National Association of Home Builders, National Association of Realtors and Institute of Supply Management.
The metric forecast slightly negative growth in remodeling activity in early 2011. After that, the indicator then hit a high of 9 percent in the first quarter of 2012, then slowed until the first quarter of 2013, when the it turned upward. It’s expected to peak at 14.7 percent growth in the second quarter of 2014.
Established in 1995, the Remodeling Futures Program studies factors that affect the growth and characteristics of U.S. home renovations and repairs and better understand the home improvement industry’s relationship to residential construction generally.
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