Image courtesy of the Harvard Joint Center for Housing Studies
The latest forecast from Harvard University’s Joint Center for Housing predicts that a slump in Americans’ remodeling spending may be in store this year.
The latest reading of the JCHS’ Leading Indicator of Remodeling Activity (LIRA) index showed that the four-quarter moving total of the nation’s remodeling spending only dropped 1.2 percent year-over-year in the first quarter, to $463 billion. That’s down from $481 billion in the fourth quarter of 2023 and a multi-year high of $489 million seen in the third quarter of last year.
Americans’ spending on home improvement projects and repairs grew modestly over the first two years of the pandemic, amid lockdowns and big swings in the prices of construction materials. It then saw a substantial jump in 2022 and 2023 as rising home mortgage rates caused many homeowners to hold off on trading up for a new home, pushing some to renovate their current homes instead. At the same time, banks and other lenders pushed into the home equity lending space to partly make up for shortfalls in fee income from refinances as those same rising mortgage rates killed that market off.
Going forward, the LIRA index projects that annual owner spending for home renovations and maintenance will decline by over 7 percent in the third quarter of this year before easing to just a 2.6 percent decline through the first quarter of 2025, the Harvard JCHS said in an announcement this week.
the third quarter of this year before easing to just -2.6 percent through the first quarter of 2025.
“Residential remodeling is expected to benefit from the rebounding housing market and stabilizing material costs as we move into next year,” Carlos Martín, project Director of the Remodeling Futures Program at the JCHS, said in a statement. “While home improvement and repair spending is down from pandemic-induced highs, the nation’s aging homes continue to need investment in critical replacements, home performance deficiencies, as well as modernization.”
Over the course of 2024, Americans are expected to spend $449 billion on home remodeling, the LIRA index predicts, and $451 billion between the first quarter of 2024 and the second quarter of 2024 and the first quarter of 2025.
“At $451 billion, spending on homeowner improvements and repairs over the coming year is anticipated to be slightly lower than the $463 billion spent over the last year,” Abbe Will, associate project director of the Remodeling Futures Program, said in a statement. “Yet, the remodeling downturn is poised to be fairly modest and short-lived with market expenditures steadying at near-record levels.”
