General strengthening in the housing market over the past 18 months is translating into increased spending on home improvements, according to the Leading Indicator of Remodeling Activity (LIRA), released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
Remodeling contractors have been reporting improving market conditions for the past four quarters and are seeing strength in future market indicators. Spending trends have been on a solid upward slope, with LIRA projecting continued strengthening of the market through the end of this year and into the first quarter of 2014.
“Homeowners are more comfortable investing in their homes right now,” said Eric S. Belsky, managing director of the Joint Center, in a release. “Consumer confidence scores are back to pre-recession levels, and since recent homebuyers are traditionally the most active in the home improvement market, the growth in sales of existing homes is providing more opportunities for these improvement projects.”
Said Kermit Baker, director of the Remodeling Futures Program at the Joint Center: “Yet, with housing starts leveling off in the second quarter and financing costs beginning to edge up, we may be seeing the beginning of more measured growth in the residential markets. Given normal timing patterns, this suggests that the pace of growth for home improvement spending should begin to moderate as we move into 2014.”
LIRA is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner-remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry.
The development of LIRA is detailed in “Developing a Leading Indicator for the Remodeling Industry” (JCHS Research Note N07-1). In July 2008, LIRA was re-benchmarked due to changes in the underlying reference series. These changes are explained in “Addendum to Research Note N07-1: Re-Benchmarking the Leading Indicator of Remodeling Activity” (JCHS Research Note N08-1).
LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter’s closing. The next LIRA release date is October 17, 2013.