LIRA projects notable dip in repair and remodeling
The short term forecasts continue to look underwhelming for the US housing market
Growth in spending on home improvements and repairs over the next year are forecast to grow at a substantially lower rate than the prior two years, according to the Leading Indicator of Remodeling Activity (LIRA), which is published by the Joint Center for Housing Studies of Harvard University.
Expenditures for repair and remodeling of owner-occupied homes increased 16.3% year-over-year in the last quarter of 2022. In 2020 and 2021, the four-quarter rate of change ranged from 10.9% to 17.6%.
By the fourth quarter of this year, annual growth is projected to decline to a mere 2.6%. Actual spending over one year is expected to reach its peak of $492 billion in the third quarter of this year before dropping to $486 billion in the fourth quarter.
The steep decline in sales of existing homes, which buyers often spend considerable dollars to refurbish, is one of the reasons given for the projected decline in the LIRA.
Home-price appreciation falls
The forecast also points to diminishing home-price appreciation as a contributor to less growth in the repair and remodeling sector. With stalled or dwindling equity in homes, owners are less likely to have the means to make major alterations by way of refinancing.
A statement accompanying the LIRA asserts, “Homeowners are likely to pull back on high-end discretionary projects and instead focus their spending on necessary replacements and smaller projects in the immediate future.”
Spending near the onset of the pandemic, in the first quarter of 2020, had grown only 3.3% on an annual basis. Over the next two years of the pandemic, spending accelerated by 23.8%.
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