Harvard: Remodeling Growth Slower Than Expected This Year

The remodeling market should continue to grow this year, but not at the pace many had been hoping.
That’s according to the latest Harvard Joint Center for Housing Studies Leading Indicator of Remodeling Activity, which still points to growth in 2011, but at a slower pace than the Joint Center was predicting just a few months ago.
The remodeling market grew 2.6 percent in 2010, according to the LIRA, lower than the 3.9 percent Harvard had predicted in the previous LIRA. (The LIRA uses a rolling one-year average to track remodeling spending and compare it to previous years. For example, the JCHS is predicting the year ending in the second quarter of this year will see 10.3 percent growth over the year ending in the second quarter of 2010.)
Projected growth rates are also down for the first three quarters of the year, with 7.1 percent in the first quarter (down from 9.1 percent in the last projection), 10.3 percent in the second quarter (12.7 percent) and 6.3 percent in the third quarter (6.5 percent). All told, the Joint Center is projecting a total 2011 growth of only 0.2 percent from 2010. Even that lower predicted growth, though, would lead to the best remodeling market since 2008 this year (see chart).
Declining home prices and lower-than-expected home sales and starts are putting downward pressure on remodeling activity. That, along with concern over the pace of overall economic growth, means we’ll probably see only modest gains in remodeling, causing the Joint Center to revise downward its outlook for the year.
“Given all the economic uncertainty that we’re seeing nationally, the home improvement market is expected to be rocky,” says Eric S. Belsky, managing director of the Joint Center. “Spending patterns through the remainder of the year are expected to reflect recent volatility in the housing market.”