The Joint Center for Housing Studies at Harvard predicts a decrease in yearly expenditure on home repairs and improvements for owner-occupied houses in the near future, following over ten years of sustained growth.
The most recent Leading Indicator of Remodeling Activity (LIRA) report estimates that expenses related to maintenance and enhancements by homeowners will experience a slight decrease of 2.8% year-over-year until the first quarter of 2024.
The forecast for sluggish remodeling activity next year is attributed to various factors, including an increase in interest rates, significant drops in homebuilding and existing home sales, ongoing uncertainty in financial markets, and the potential for a recession. These conditions are expected to lead homeowners to either reduce or postpone projects, beyond essential replacements and repairs.
Experts predict that spending on homeowner improvements and maintenance will reach $458 billion in the coming year, which is lower than the market spending of $471 billion recorded over the past four quarters.
Remodeling expenditure may receive some support against significant declines as the number of homes authorized for renovation projects continues to increase steadily, and there are also several federal incentives available for energy-efficient retrofits.
The LIRA chart shows the combined spending levels for the respective quarter and the preceding three quarters. The value of the bar for a particular quarter, such as 2021-Q1, represents the total spending that occurred during that quarter and the three preceding quarters, namely 2020-Q2, 2020-Q3, and 2020-Q4. Therefore, the bars for Q4 in the chart indicate the total amount of spending that took place during the corresponding calendar year. This method of aggregating spending levels enables the chart to present a more comprehensive picture of the trends in remodeling expenditure, as it takes into account the cumulative effect of spending over several quarters.