Residential remodeling expenditures could reach $400 billion by the third quarter of 2022, according to projections in the latest Leading Indicator of Remodeling Activity (LIRA). Strong growth in the indicator, which includes national home improvement and repair spending on owner-occupied homes, is expected to continue during 2022.
Based on four-quarter moving totals, LIRA increased 9% during the first quarter of this year, 8.8% during Q2, and 12.3% during Q3. Growth of 9% is anticipated for the current quarter. It is projected to taper to 8.6% by the second quarter of 2022.
Researchers credit the strong housing market “with elevated home construction and sales activity and immense house price appreciation in markets across the country” as factors for the growth. They expect rapid expansion of owners’ equity will fuel demand for more and larger remodeling projects into 2022.
LIRA includes interior and exterior home improvements such as remodeling, renovation, restoration, additions, alterations, and replacements of home components that add value to a home or property. Also included are maintenance and repair activities that preserve the current value of the home.
“Home remodeling will likely grow at a faster pace given the ongoing strength of home sales, house price appreciation, and new residential construction activity,” stated Chris Herbert, managing director of the Joint Center for Housing Studies of Harvard University. He noted a significant rise in permits for home improvements indicates owners are continuing to invest in bigger discretionary and replacement projects.
Abbe Will, associate project director in the Remodeling Futures Program at the Center, said remodeling expenditures to owner-occupied homes will likely surpass $380 billion by mid-2022. “Larger gains in retail sales of building materials suggest the remodeling market continues to be lifted by DIY activity as well,” she added.
Several headwinds could taper expected expenditures for remodeling and renovations. The rising costs of labor and building materials along with increasing interest rates were possibilities Will mentioned.
In its latest report, officials with the Remodeling Futures Program noted “unprecedented changes” to the US economy brought on by the pandemic showed “extreme percent changes from pandemic-induced lows.” To reduce such growth rate volatility, its projections for the second and third quarters of 2022 utilize smoothed data for three leading model inputs: residential remodeling permits, single-family housing starts, and existing single-family home sales.
Produced quarterly since 2007, the LIRA measures short-term trends in remodeling activity for professionally-installed and do-it-yourself remodeling and repair projects. It is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters. The LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The next report is scheduled for release on January 20.