Harvard Says Remodeling Spending Downturn to Slow
Harvard University's Joint Center for Housing Studies anticipates declines in remodeling spending to slow from now through the first quarter of 2025, according to the Leading Indicator of Remodeling Activity (LIRA).
The LIRA provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters.
National spending is expected to decrease to $451 billion by the end of 2024.
“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 [four quarters],” stated Abbe Will, associate director of the JCHS' Remodeling Futures Program. “Yet, the remodeling downturn is poised to be fairly modest and short-lived with market expenditures steadying at near-record levels.”
The slowed downturn will be buoyed by the rebounding housing market and stable material costs, says Harvard. According to one of LIRA’s eight indicators, the National Association of Realtors’ (NAR) Existing Single-Family Home Sales, existing home sales dropped 4.3% in March 2024 from February while the median existing-home sales price increased by 4.8%.
"Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves," said NAR Chief Economist Lawrence Yun in the April 2024 report. "There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market."
The 30-year fixed-rate mortgage averaged 6.88% as of April 11, up from both the week prior and one year earlier, according to Freddie Mac.
The high number of the nation’s aging homes will support spending, and the COVID boom in remodeling pushed spending to above-record levels, says Harvard.
According to the National Association of Home Builders (NAHB), the median age of an owner-occupied home is 40. The majority of homes were built before 1980, and 35% were built before 1970. Add on the slow increase of new construction—which produced just 2% of the housing stock in 2022—remodeling could be poised for greater growth than new construction, says NAHB.
The Joint Center for Housing Studies at Harvard publishes its LIRA report quarterly, providing a short-term outlook of national home improvement and repair spending on owner-occupied homes.
It utilizes data from eight economic and housing indicators to measure an annual rate of change in spending on remodeling. Those indicators include data from the US Census Bureau, National Association of Realtors, S&P CoreLogic Case-Shiller, BuildFax, and more.
