Harvard: Home Remodeling Poised to Bust Loose

Home improvement spending could be in double-digit growth mode by as early as next year’s first quarter, according to the Joint Center for Housing Studies of Harvard University.

“Warm weather in the first quarter temporarily bumped up remodeling activity in many areas,” says Eric Belsky, managing director of the Joint Center. “By the end of the year, however, positive market fundamentals are expected to kick in, moving the industry out of this ebb and flow period and into a new growth phase.”

With home sales picking up and contractors seeing more positive business conditions, remodeling activity should start picking up by the end of the year, is in a position to see accelerated growth by the end of this year and into 2013, according to the latest index published by the Joint Center’s Remodeling Futures Program.

Based on the Joint Center's Leading Indicator of Remodeling Activity, activity is projected to grow steadily from $113.6 billion in the second quarter of 2012 to $114 billion in the third quarter, $120.7 billion in the fourth quarter and $128.9 billion in 1Q 2013, for a four-quarter moving rate change of 12%.

“Home improvement activity has been bouncing around the bottom of this cycle for almost three years now, waiting for the industry to get some traction,” says Kermit Baker, director of the Remodeling Futures Program. “Now, the combination of low financing costs, stronger consumer confidence, improving home sales, and the perception that home prices have stabilized in most markets across the country are encouraging owners to start working on the list of home improvement projects they have been putting off.”

The Leading Indicator of Remodeling Activity 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.