The most recent Leading Indicator of Remodeling Activity (LIRA) reported by the Remodeling Futures Program at Harvard University’s Joint Center for Housing Studies suggests the remodeling market could be bottoming out. According to the LIRA, improvement spending by homeowners will continue its downward trend through 2009 and into the first part of 2010, and annual declines will hover around 11 percent for the next several quarters.
Because most remodeling occurs when homes are prepared for sale or personalized after sale, the state of the housing industry has a profound impact on the overall health of the remodeling sector. Still, the effects tend to take a few quarters to kick in, says Remodeling Futures Program research assistant Abbe Will. Just as housing appears to be moving past its bottom and entering a turnaround period—albeit a long, slow one—remodeling is “bumping along the bottom of the market,” she explains.
“What’s fortunate is that the remodeling industry is not experiencing the same declines we’re seeing in the home building industry,” Will continues. “Year-over-year remodeling spending is only down 10 percent to 12 percent, although it’s off 25 percent from its peak. That’s a sliver of good news.”
The latest LIRA report shows stabilizing, rather than worsening, remodeling declines. And yet recovery is still a long way off, according to the Remodeling Futures Program, which foresees a dreary outlook going into 2010 as the segment continues to lag behind housing’s turnaround. Both housing starts and sales of newly built single-family homes have been trending upward over the past few months, according to data released by the U.S. Commerce Department. Overall housing starts improved by 3.6 percent, and new-home sales rose by 11 percent in June. With housing still on an uncertain and rocky road toward an anticipated early 2010 turnaround, the remodeling market is facing tough times ahead.
“Although we’re not seeing conditions getting worse or continuing to fall, we’re also not really seeing indications that the market will be turning around anytime soon,” Will says.
For more on the housing recovery:
Read ourJuly 16 news brief on BUILDER magazine’s mid-year forecast roundup.
Read ourJune 25 article on the Joint Center’s “State of the Nation’s Housing 2009” report.
Read ourJune 18 article on the U.S. Census Bureau and U.S. HUD May building permit and housing starts data.
