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The robust pace of spending on home renovations and repairs is expected to stay strong over the coming quarters, 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 that annual growth in homeowner remodeling expenditure will remain above 7 percent throughout the year and into the first quarter of 2019.
“Strengthening employment conditions and rising home values are encouraging homeowners to make greater investments in their homes,” Chris Herbert, managing director of the Joint Center for Housing Studies, said in a statement. “Upward trends in retail sales of building materials and the growing number of remodeling permits indicate that homeowners are doing more – and larger – improvement projects.”
As rising home values create more equity for homeowners, home equity loans and lines of credit – traditional sources of funding for home renovation and remodeling projects – remain popular, despite rising interest rates and changes to the nation’s tax code.
Lenders have originated more than $1.25 billion in non-purchase loans for single-family homes in Massachusetts in the first quarter of the year, a slight drop from last year’s $1.27 billion in the first quarter, according to data analysis from The Warren Group, publisher of Banker & Tradesman.
“While the overall outlook is positive, one area of concern is the slowing growth in sales of existing homes, since sales traditionally trigger significant renovation spending by both sellers and buyers,” Abbe Will, associate project director in the Remodeling Futures Program at the Joint Center, said in a statement. “Even with this headwind, annual spending on residential improvements and repairs by homeowners is set to exceed $340 billion by early next year.”
The 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.
