After three consecutive years of declining remodeling activity, a key indicator of future spending on new kitchens, remodeled baths and other home improvement projects is finally pointing upward.
Substantive growth in remodeling spending seems likely next year, according to the Leading Indicator of Remodeling Activity, which is published quarterly by the Joint Center for Housing Studies at Harvard University. The model is calling for spending to pick-up to a double-digit pace through the first half of 2011.
"Remodeling contractors are feeling much more positive about the outlook for home improvement projects," says economist Kermit Baker, director of the Remodeling Futures Program at the Joint Center. "Low financing costs and a wave of previously foreclosed homes coming back on the market and in need of renovation are expected to generate healthy growth over the next several quarters."
Actually, remodeling spending has nowhere to go but up, if only because the slowdown in activity over the previous three years is well below its long-term trend, according to Eric Belsky, managing director of the Joint Center. "A recovering economy should stabilize house prices and consumer confidence levels, encouraging homeowners to reinvest in their homes and undertake deferred repairs and replacements," Belsky said.
The LIRA is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. Measured as an annual rate-of-change of its components, the index 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.
