A continual bright spot throughout the housing decline, home improvement activity is now showing signs of a potential stall. The Leading Indicator of Remodeling Activity (LIRA) report, released July 21 by the Remodeling Futures Program at Harvard’s Joint Center for Housing Studies (JCHS), forecasts that remodeling spending will be down 4 percent through the first quarter of 2012. Although discretionary funds used for home improvement should continue to increase through fall of this year, indicators such as a downturn in pending home sales and housing starts portend a winter drop that may linger well into next year. Eric S. Belsky, JCHS managing director, attributes the remodeling sector’s impending slump to recent economic weaknesses that cause consumers to lose confidence and pull back on future projects.
“We’re coming off the lowest end of the downturn,” says Abbe Will, a research analyst for the JCHS, “so even weak spending now is better than at the bottom of the recession last year.” Will goes on to explain that the current economic malaise affects consumer patterns, so people put off buying or building new houses and that in turn slows remodeling. To generate the LIRA, analysts like Will look at about eight different sets of relevant statistics. Many of those input variables are volatile right now, she says, rather than showing consistency in either direction. Plus, housing’s general upward swing that seemed well under way last year began to falter. “Some inputs are looking up,” Will adds. “Retail sales are OK and interest rates are still favorable. We’re not ready to say that remodeling will stay down for a long time, but we thought we were on the way back to a healthy recovery and housing just isn’t rebounding like expected.”
