The latest forecast from Harvard University’s LIRA—Leading Indicator for Remodeling Activity—indicates a slowing market for remodeling and home improvement activity. The Q4 2023 LIRA release suggests that the remodeling market in 2024 will shrink for the first time since 2010. “But signs point to some easing of declines by the year’s end,” said Abbe Will, associate director of the remodeling research group at Harvard. Industry revenues for residential improvements and repairs will fall to an estimated $450 billion in 2024, down from $481 billion in 2023.
It is easy to forget, however, that at $450 billion in 2024, the market remains much higher than pre-pandemic levels. Data from the American Housing Survey analyzed by Harvard suggest that the market cleared $500 billion in 2021. Furthermore, with declines easing toward the end of the year, we may now be seeing the “market bottom” for remodeling. And the longer-term outlook for the industry remains strong.
U.S. Remodeler Index Rebounds in Q4
In separate market-outlook news, remodelers signaled a modest improvement in industry conditions during the fourth quarter of 2023 along with ‘clear optimism’ for 2024 in the latest reading from the U.S. Remodeler Index (USRI)
A sentiment index where any reading over 50 is considered a ‘growing market’, the 4Q 2023 USRI increased by 5 points to a reading of 58, the largest increase in sentiment since Q1 2021. Remodelers said they completed 2 percent more projects year-over-year, which was a “a clear and broad-based upturn from five consecutive quarters of decelerating growth,” the report said.
Full-service remodelers completed .4 percent more projects year-over-year. Home improvement and replacement pros completed 3 percent more projects year-over-year. And design-build firms completed 3 percent more projects year-over-year. Perhaps more significantly, remodelers raised full-year 2024 expected revenue growth from a range of 3 to 4 percent to 6 to 8 percent across all three industry segments.
Home improvement replacement pros expect a 7.5 percent full-year 2024 revenue growth, up from 2.8 percent forecasted for 2024 when asked in the previous quarter. Design-build firms expect 6.4 percent full-year revenue growth, up from 4.3 percent. And full-service remodelers expect 5.5 percent full-year 2024 revenue growth, up from 2.9 percent.
The fourth quarter survey ran from Dec. 22, 2023 to Jan. 2, 2024. The index, which was launched in 2021, is a collaboration between Qualified Remodeler Media and John Burns Research & Consulting.
Positive USRI Sentiment Bolstered by NAHB Survey
A quarterly survey of remodelers who are members of the National Association Home Builders—the NAHB / Westlake Royal Remodeling Market Index—backed up the findings of the U.S. Remodeler Index. It posted an overall reading of 67 on a 1 to 100 scale, which was much stronger than the results from the USRI. The higher number is derived from an adjustment made by researchers to account for seasonality.
The RMI’s future indicators index increased two points to 59. The component measuring leads and inquiries held steady at 56. And the component measuring backlog rose three points to 62.
“Remodelers’ sentiment was quite positive at the end of 2023, when seasonally adjusted for the slowdown that invariably occurs during that part of the year,” said NAHB Remodelers Chair Alan Archuleta, a remodeler from Morristown, N.J. “High costs remain an issue in some places, but in many markets, customers seem to have adjusted to the unavoidable higher prices.” QR