Home improvement spending will remain soft through the first half of 2012, according to the most recent Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies (JCHS). The data, gathered from third quarter economic statistics, shows that people still are nervous about larger projects, and it predicts a slight decline in annual homeowner improvement spending. That spending increased or remained relatively stable throughout all of 2010, with just small drops of 2 percent or less this year. And although the fourth quarter this year should see a jump of nearly 4 percent in home improvement activity, all indicators point toward plunges of 3 percent to 5 percent during the first half of 2012. Remodeling spending has remained at or higher than $110 billion even during the lowest parts of the economic downturn, but is expected to fall below that mark by about $5 billion early next year.
Analysts at the Remodeling Futures Program, who create the quarterly LIRA report, review eight major economic factors such as interest rates and U.S. Census data on housing sales, unemployment rates, and retail sales to determine the rate of change in the home improvement industry as well as to predict future activity. Many of the LIRA input variables continue to be as volatile and unsettled as they were this summer when the prediction for a 2012 remodeling downturn originally was made, says JCHS research analyst Abbe Will. She adds that they don’t expect remodeling to stay in decline long-term, but the hoped-for vigorous rebound isn’t going to happen within the next several quarters. The Remodeling Futures Program developed LIRA to provide future insight into key turning points of the home improvement business and show its relationship to the broader residential construction industry. The report is released three weeks after each quarter closes and shows predictions for subsequent quarters.
Falling in line with trends predicted by LIRA, the latest NAHB Remodeling Market Index (RMI) dropped 2.2 points for the third quarter of 2011. The RMI previously reached a four-year high in the first quarter of this year, but the professional remodelers whose answers are analyzed for the survey recently responded that many clients are hesitant to commit to big projects either because they fear that financing won’t come through or they prefer to wait until the economy is more stable.
