Home Remodeling Projected to Decline in 2024May 3rd, 2023 by Travis Rains
Homeowners have been making improvements to their dwellings on a steady basis for nearly a decade, with those efforts expanding over the past few years with COVID-19. However, according to the newly released Leading Indicator of Remodeling Activity (LIRA) from the Remodeling Futures Program at Harvard’s Joint Center for Housing Studies, that trend could come to an end in 2024.
According to the latest LIRA report, which provides a short-term outlook into home improvement and repair spending, the home remodeling market has experienced more than a decade of continuous growth. For example, expenditures for home improvement and maintenance increased by as much as 17.5% in the third quarter of 2022. Since then, the sector has seen increases of 16% and 13.8% in the subsequent two quarters.
Increases are also projected throughout 2023, though at declining rates with each quarter. The remaining quarters of 2023 are expected to experience growth, albeit at a rate of 9.7% in the second quarter, 5.8% in the third quarter and 2.6% in the fourth. With that downward trajectory, a nearly decade-long period of growth may finally come to an end next year, according to the report. LIRA projects that year-over-year expenditures for home improvement and maintenance will decline 2.8% in the first quarter of 2024.
Carlos Martín, project director of the Remodeling Futures Program, says higher interest rates and “sharp downturns” in homebuilding and home sales are driving the latest projection.
“With ongoing uncertainty in financial markets and the threat of a recession, homeowners are increasingly likely to pare back or delay projects beyond necessary replacements and repairs,” he says.
Furthermore, the center’s State of the Nation’s Housing 2022 report notes that rising home prices and a for-sale inventory that’s at an all-time low were keeping renters out of the market. Rent increases, from 0.8% in December 2020 to 16.2% in December 2021, make it difficult for many to save enough to buy homes, the report found.
Abbe Will, associate project director for Harvard’s program, says that maintenance spending is projected to top out at $458 billion in 2024, compared to $471 billion over the past four quarters.
“However, strong and steady growth in the number of homes permitted for remodeling projects, as well as a slew of federal incentives for energy-efficiency retrofits may yet buoy remodeling expenditure from steeper declines,” she says.
At the end of 2022, the Biden-Harris administration announced that approximately $9 billion would be made available to states and Tribes for consumer home energy rebate programs as part of the Inflation Reduction Act. That includes rebates of up to $4,000 for households making energy-efficient retrofits. Whether those measures will help to bolster a fading market for remodeling and improvements is yet to be seen.