LIRA Projects Remodeling Slowdown in 2023 While Remaining Above Historical Average

July 21st, 2022 by Travis Rains

Slowing home sales, rising interest rates and home price appreciation moderation will see a slowdown of homeowner remodeling activity through mid-2023. While growth will soften, annual remodeling expenditures are still projected to expand to approximately $450 billion, according to the recently-released Leading Indicator of Remodeling Activity (LIRA).

The Leading Indicator of Remodeling Activity comes courtesy of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University a few weeks after the close of each quarter. The most recent report projects that year-over-year gains in remodeling expenditures will decline from 17.4% in 2022 to 10.1% by the second quarter of 2023.

“Slowing sales of existing homes, rising mortgage interest rates, and moderating house price appreciation are expected to dampen owners’ investments in home improvements and maintenance over the coming year,” says Carlos Martín, project director of the Remodeling Futures Program. “Steep slowdowns in homebuilding, retail sales of building materials, and renovation permits all also point to a cooling environment for residential remodeling.”

Expenditures for homeowner improvements and repairs have been continuously on the rise since the fourth quarter of 2020, which saw $336 billion in expenditures and a 1.2% increase over the previous quarter. Expenditures reached $405 billion in the second quarter of 2022, marking a more than 4% increase over the first quarter of the year. That growth is now projected to slightly decline by 1.4% moving into the third quarter of 2022, from 15.9% to 17.3%.

The decline will be even more palpable moving into the final quarter of 2022, which is projected to see an increase of only 1% from $417 billion to $431 billion. Starting in 2023, figures will drop by 2.5% to 14.9%, or $448 billion. Homeowner improvements and repairs will see an even sharper drop off in the second quarter of 2023 to $446 billion, a projected 4.8% decline from the previous quarter.

“While beginning to soften, growth in spending for home improvements and repairs is expected to remain well above the market’s historical average of 5%,” says Abbe Will, associate project director of the Remodeling Futures Program. “In the first half of 2023, annual remodeling expenditures are still set to expand to nearly $450 billion.”

The next LIRA will be released at the end of October 2022.

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