Without the unusual effects of the pandemic—which are admittedly hard to measure and furthermore project—this quarter's Leading Indicator of the Remodeling Industry from the expert researchers at the Joint Center for Housing Studies of Harvard University projects a slight increase in remodeling spending growth from Q3 to Q4 2020 and an even further increase to 4.2% in Q1 2021. The latter would be a year-over-year increase of about one percentage point.
But the pandemic is here and seemingly unrelenting. As a result, JCHS researchers built a downside model including new inputs—retail sales of building materials, home prices, and GDP—that show a less optimistic rise in spending proceeded by a drop into the negatives. The LIRA hasn't projected negative growth in remodeling spending since 2010, when the effects of the Great Recession were in full swing.
“As the pace of do-it-yourself activity, maintenance work, and exterior-focused projects begins to taper, annual expenditures by owners for home improvements and repairs are expected to shrink slightly to $326 billion by the middle of 2021,” said Abbe Will, Associate Project Director in the Remodeling Futures Program at the Center. “Given the ongoing uncertainty surrounding the broader impact of the pandemic, the timing on when we’ll reach a bottom in the remodeling market also remains unclear.”
Remodelers Optimistic On Current and Future Market
Still, despite the indutry's turmoil and dampened projections on spending growth, remodelers are regaining their confidence, according to the latest Remodeling Market Indicator (RMI) from the National Association of Home Builders.
Where remodeler confidence took a nosedive in Q1, particularly as it related to the future of the market, in Q2 it seems their optimism has rebounded—and not just nationally but across every region.
Also, as we've reported in the past, smaller jobs tend to take less of a hit during times of economic hardship and it seems to be no different during these. Remodelers are more confident in the current state of small jobs (i.e., under $20,000) than in any other category surveyed.