As the coronavirus (COVID-19) pandemic continues to unfold, the latest Leading Indicator of Remodeling Activity (LIRA) released by the the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University (JCHS) projects expenditures for improvements and repairs to homes are expected to slow by the middle of 2021. If weakness persists in the broader economy due to the pandemic, the LIRA projects annual declines in renovation and repair spending of 0.4% by the second quarter of next year.
“The remodeling market was buoyed through the early months of the pandemic as owners spent a considerable amount of time at home and realized the need to update or reconfigure indoor and outdoor spaces for work, school, play, exercise, and more,” Chris Herbert, managing director of the JCHS, said in a press release. “However, sharp declines in home sales and project permitting activity this spring, as well as record unemployment, suggest many homeowners will likely scale back plans for major renovations this year and next.”
Before the onset of the pandemic, LIRA projected a healthy rebound in home remodeling spending and annual growth of 3.9% by the first quarter of 2021. As a result of the unprecedented changes to the U.S. economy since mid-March, the Remodeling Futures Program provided a downside range for its remodeling outlook, incorporating retail sales of building materials, home prices, and GDP. The downside range suggests annual spending will increase between 1.7% and 2.1% annually from the third quarter of 2020 through the first quarter of 2021 then will decline by the middle of next year.
Conversely, the LIRA's standard methodology, which does not include forecasted trends, calls for increasing remodeling activity through the start of 2021. The standard methodology suggests annual growth in renovation and repair spending of 4.2% by the first quarter of 2021, with annual expenditures by owners for home improvements and repairs growing $339 billion.
“As the pace of do-it-yourself activity, maintenance work, and exterior-focused projects begins to taper, annual expenditures by owners for home improvements and repairs are expected to shrink slightly to $326 billion by the middle of 2021,” Abbe Will, associate project director in the Remodeling Futures Program, said. “Given the ongoing uncertainty surrounding the broader impact of the pandemic, the timing on when we’ll reach a bottom in the remodeling market also remains unclear.”
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-October 2020.
This article originally appeared in JLC's sister publication, Remodeling.