A key benchmark that gauges future growth in the home remodeling industry indicates that growth in home improvement expenditures will hold stable throughout 2007, even with recent weakness in house prices and consumer confidence.
According to the indicator, developed by Harvard’s Joint Center for Housing Studies, homeowner spending for home improvements will essentially remain constant through the first quarter of 2008, and overall growth in spending for 2007 is expected to be 3 percent.
“Homeowners continue to draw on built-up equity in their homes to finance home improvements,” explains Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “However, the pace of spending remains moderate and tempered in the context of a very soft housing market.”
“Falling sales of existing homes, and depressed remodeling contractor sentiment remain negative factors in the outlook for the industry,” comments Kermit Baker, director of the Remodeling Futures Program of the Joint Center. “With borrowing costs remaining favorable, though, owners are still able to take advantage of the run-up in their house’s value over the past decade to finance home improvement projects.”
The center’s Leading Indicator for Remodeling Activity (LIRA) is a new quarterly initiative from the Remodeling Futures Program to estimate future national remodeling activity with a horizon of three quarters, and replaces the Remodeling Activity Indicator (RAI) previously released by the Joint Center.