After initial projections that annual gains in residential remodeling spending would go negative by the second half of 2020, the latest Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies (JCHS) projects modest increases in spending during 2020. Recent LIRA reports have forecast a dramatic slowdown in the remodeling market compared to recent years and the third quarter report was the first to suggest a decline in annual home improvement and maintenance expenditures. The most recent fourth quarter LIRA has adjusted projections and, while it projects remodeling expenditure growth will remain modest in 2020, the latest LIRA does not project spending growth will go negative this year.
The LIRA projects year-over-year growth in remodeling spending will increase by 1.5% in 2020, a significant decline from the more robust annual gains of 5% to 7% the industry has experienced in recent years.
Homeowners are estimated to have spent $328 billion in remodeling expenditures in 2019 and are projected to spend $326 billion annually in the four-quarter period through the first quarter of 2020, marking a 3.4% year-over-year increase. Remodeling spending is expected to stagnate through the middle of the year, with the projected $328 billion in annual spending through the third quarter of 2020 just 0.4% higher than the estimated annual spending through the third quarter of 2019. Despite the "lackluster" growth projection of less than 2%, homeowner improvement and repair expenditures are still set to expand in 2020 to over $330 billion, according to Abbe Will, associate project director in the Remodeling Futures Program at the JCHS.
“While homebuilding and sales activity are now firming, softness from earlier last year will continue to pull on remodeling spending growth in 2020,” Chris Herbert, managing director of the JCHS, said in a news release. “However, the slowdown should begin to moderate by year-end as today’s healthier housing market indicators will ultimately lead to more home renovation and repair.”
LIRA provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator, which is measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and the following four quarters. LIRA is intended to help identify future turning points in the business cycle of the home improvement and repair industry. The indicator was re-benchmarked in April 2016 to a broader market measure based on the American Housing Survey. The next quarterly report will be released in mid-April 2020.
