RETAILOBSERVER.COM SEPTEMBER 2021
20
FURTHER STRENGTHENING EXPECTED
FOR HOME REMODELING
Annual gains in homeowner improvement and maintenance
spending are set to accelerate in the second half of the year and
remain elevated through mid-year 2022, according to the Leading
Indicator of Remodeling Activity (LIRA) released today by the
Remodeling Futures Program at the Joint Center for Housing
Studies of Harvard University. The LIRA projects annual growth in
home renovation and repair expenditures will reach 8.6 percent
by the second quarter of next year.
"Home remodeling will likely grow at a faster pace given the
ongoing strength of home sales, house price appreciation, and
new residential construction activity," says Chris Herbert,
managing director of the Joint Center for Housing Studies. "A
significant rise in permits for home improvements also indicates
that owners are continuing to invest in bigger discretionary and
replacement projects."
"Larger gains in retail sales of building materials suggest the
remodeling market continues to be lifted by DIY activity as well,"
says Abbe Will, associate project director in the Remodeling
Futures Program at the Center. "By the middle of next year, annual
remodeling expenditures to owner-occupied homes are expected
to surpass $380 billion."
A year after the unprecedented changes to the US economy
brought on by the pandemic, many economic indicators are
showing extreme percent changes from pandemic-induced lows.
To reduce the immense growth rate volatility generated by these
year-over-year comparisons, the projection for 2022-Q2 utilizes
smoothed data for two leading model inputs: residential
remodeling permits and single-family housing starts. Using
unsmoothed inputs in the LIRA model would have projected
an unlikely annual growth rate roughly twice as large as reported.
The Remodeling Futures Program will continue to monitor
input volatility.
The Leading Indicator of Remodeling Activity (LIRA) provides a
short-term outlook of national home improvement and repair
spending to owner-occupied homes. The indicator, 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 subsequent four quarters, and is intended to help
identify future turning points in the business cycle of the home
improvement and repair industry. Originally developed in 2007,
the LIRA was re-benchmarked in April 2016 to a broader market
measure based on the biennial American Housing Survey.
I N D U S T R Y [ N E W S ]
