Remodeling spending expected to decline through 2021
Prior to the COVID-19 crisis, remodeling spending was projected to grow by 3.9%.
Remodeling activity is likely to see a decrease through the first quarter of 2021, according to the latest Leading Indicator of Remodeling Activity (LIRA).
Released by the Remodeling Future Program at the Joint Center for Housing Studies (JCHS) of Harvard University, the LIRA expects owner expenditures for home renovations and repairs to decline at least through the first quarter of next year due to fallout from the COVID-19 pandemic.
Pre-pandemic, the LIRA pointed to a healthy rebound in home remodeling spending with annual growth of 3.9% by the first quarter of 2021, but the latest data incorporating both actual and forecasted impacts of the economic shutdown point to spending declines this year with further worsening into 2021.
“While there is still considerable uncertainty surrounding the near- and longer-term impacts of the pandemic, the best available evidence suggests substantial downturns in key remodeling indicators of new home construction, home sales, and values of existing homes over the coming quarters,” Chris Herbert, managing director of the Joint Center for Housing Studies, said in a statement issued by the JCHS this morning. “Homeowners who are concerned about losses of income, home equity, and other forms of wealth are anxious about making large investments in improving their homes in this economic environment.”
With the unprecedented changes to the US economy since mid-March, the Remodeling Futures Program is providing a downside range for the home remodeling outlook, which incorporates forecasts for several core model inputs—retail sales of building materials, home prices, and GDP.
“Quarterly spending for improvements and repairs to the owner-occupied housing stock is projected to turn negative by the third quarter, and annual expenditures are expected to fall to $322 billion by early next year with potential for even more severe declines to follow,” says Abbe Will, associate project director in the Remodeling Futures Program at the Center. “Beyond the start of next year, remodeling activity that would typically result from expanding homebuilding, sales of existing homes, and home prices mean the greatest downturn could come later in 2021 with recovery depending on what occurs in housing markets over the remainder of this year.”
The LIRA provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters.
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