Pandemic to Weigh on Home Remodeling Spending

by Emily Blackburn

Expenditures for improvements and repairs to owner-occupied homes are expected to slow by the middle of next year as the COVID-19 pandemic continues to unfold, according to the Leading Indicator of Remodeling Activity (LIRA) being released tomorrow by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

Assuming continued weakness in the broader economy due to the public health crisis, the LIRA projects annual declines in renovation and repair spending. Rates of decline at 0.4 percent by the second quarter of 2021 are anticipated. With the changes to the US economy since mid-March, the Remodeling Futures Program is again providing this downside range for the home remodeling outlook. This outlook incorporates forecasts for several core model inputs: retail sales of building materials, home prices, and GDP.

In contrast, the LIRA’s standard methodology does not include forecasted trends. This would have called for increasing remodeling activity through the start of next year.

“The remodeling market was buoyed through the early months of the pandemic as owners spent a considerable amount of time at home and realized the need to update or reconfigure indoor and outdoor spaces for work, school, play, exercise, and more,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “However, sharp declines in home sales and project permitting activity this spring, as well as record unemployment, suggest many homeowners will likely scale back plans for major renovations this year and next.”

Ongoing Uncertainty Obscures Market Predictions

“As the pace of do-it-yourself activity, maintenance work, and exterior-focused projects begins to taper, annual expenditures by owners for home improvements and repairs are expected to shrink slightly to $326 billion by the middle of 2021,” says Abbe Will, associate project director in the Remodeling Futures Program at the Center. “Given the ongoing uncertainty surrounding the broader impact of the pandemic, the timing on when we’ll reach a bottom in the remodeling market also remains unclear.”

Column and line chart providing quarterly historical estimates and projections of homeowner improvement and repair spending from 2017-Q4 to 2021-Q2 as four-quarter moving sums and rates of change. Year-over-year spending growth ranged from 6.0-7.0% through 2019-Q2. The standard methodology projects a steady deceleration of spending growth to 1.5% by 2020-Q3. This, before rebounding to 4.2% growth in 2021-Q1 and then slowing again to 1.5% in 2021-Q2. The downside projection shows a similar trend but at lower rates with annual spending rates rebounding to 2.1% in 2020-Q1 and then falling to -0.4% in 2020-Q2. Under this scenario, annual spending levels are expected to decrease from $328 billion in 2020-Q2 to $326 billion in 2021-Q2.

Related Posts

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More