With existing housing sales picking up and remodeling contractors feeling more bullish than they have in recent years, remodeling activity in the U.S. is poised for accelerated growth by the end of this year and into 2013, according to the most recent Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA suggests that annual homeowner improvement spending may reach double-digit growth by the first quarter of 2013.
A combination of several positive factors explains why growth can occur, including low financing costs, stronger consumer confidence and improving home sales. The perception that housing prices have stabilized in most markets is also encouraging owners to start work on home improvement projects they have been putting off.
The 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 next LIRA is scheduled for release in mid-October.
New research from the National Assn. of the Remodeling Industry (NARI) provides support for the LIRA’s positive outlook. NARI’s second quarter research measuring remodelers’ view of business conditions shows its members believe the current climate is slightly more positive than it was at the same time last year. NARI National Secretary Kevin Anundson, CR, CKBR, said the new research provides “clear indications that some NARI members believe they have weathered the storm and now expect consumer confidence to rise.”
Over the next three months, NARI members expect stronger sales growth due to the availability of low interest rates, improving housing prices and the fact that many home improvements simply cannot be put off any longer.
More people are fixing up their homes because they plan on living there for a long time, a trend that is also supporting growth in the remodeling sector. A spring 2012 poll of homeowners by NARI found that 26 percent of respondents are planning to stay in their home an additional 16 to 20 years because their home’s value had decreased during the recession. Twenty-three percent reported they are going to stay an additional six to 10 years in their homes. “Remodeling used to be about increasing resale value—making improvements that are appealing to the majority of buyers in order to boost the value of the home,” NARI National President Dean Herriges, MCR, CKBR, says. “But that is simply not the case anymore.”