Remodeling Boom Seen into 2013
By: Jann Swanson
Harvard: Remodeling Boom Seen into
The Harvard Joint Center for Housing Studies is predicting
strong gains in remodeling and home improvement activity over the rest of 2012
and the first half of next year. The
Center’s Leading Indicator of Remodeling Activity (LIRA) suggests that the
seeds of a recovery in the remodeling industry have been planted and there
could be double digit growth in home improvement spending over the next eight
LIRA is designed to estimate home improvement spending for
the current quarter and the following three quarters using the Department of
Commerce’s Value of Construction Put in Places series or C-30 to project the
value of residential improvements. This
annual or moving four-quarter rate of change compares total spending in any
given four-quarter period to the total spending that occurred in the four
quarters prior to that period.
The LIRA projections can be found in the line graph for the
last four quarters of the chart. Since the LIRA is designed as a
forward-looking indicator, all of the historical data in the chart comes
directly from estimates of improvement spending in the C-30 series.
Commerce defines home improvements as remodeling, additions,
and major replacements to owner-occupied properties after the completion of the
original building. This definition
include additions to existing buildings, finishing basements and attics,
improvements to the exterior building or lot, and replacement of major systems
and equipment such as furnaces or water heaters. It does not include spending for painting, landscaping, or routine maintenance.
“After a bump in home improvement activity during the
mild winter, there was a bit of a pause this summer,” says Eric S. Belsky,
managing director of the Joint Center.
“However, the LIRA is projecting an acceleration in market activity
beginning this quarter, and strengthening as we move into the new year.
“Strong growth in sales of existing homes and housing
starts, coupled with historically low financing costs, have typically been
associated with an upturn in home remodeling activity some months later,”
says Kermit Baker, director of the Remodeling Futures Program at the Joint
Center. “While the housing market
has faced some unique challenges in recent years, this combination is expected
to produce a favorable outlook for home improvement spending over the coming