Slowing Growth in Home Renovations Should Stabilize by Year’s End

by Abbe Will
Research Analyst

The healthy gains in residential remodeling activity estimated for 2014 and the first part of 2015 are expected to decelerate, but then gain a little more traction by the end of the year, according to our latest Leading Indicator of Remodeling Activity (LIRA), released today. The LIRA projects annual spending for home improvements will increase a more modest 2.9% in 2015.

One of the largest contributors to this dampening of remodeling growth in 2015 is the sluggish existing home sales activity last year. Housing turnover typically sparks significant improvement spending as new owners customize their recent purchases to fit their needs and, with sales down last year, remodeling will feel the effects this year.

Moving forward, signs of higher growth in remodeling activity include strengthening retail sales of building materials. Also, rising home equity and still favorable interest rates continue to encourage owners to reinvest in their homes.”

NOTE ON LIRA MODEL:  Beginning with the first quarter 2014 release, long-term interest rates were removed from the LIRA estimation model.  For more information on the reasons for and implications of this change, please read our blog post from April. 

For more information about the LIRA, including how it is calculated, visit the Joint Center website.