Annual expenditures for improvements and repairs to owner-occupied homes are expected to decline at an accelerating rate through the first half of 2024, according to the latest Leading Indicator of Remodeling Activity (LIRA) by Harvard's Joint Center for Housing Studies.
The LIRA projects that year-over-year spending on homeowner improvements and maintenance will shrink by 2.7% through the first quarter of next year and by 5.9% through the second quarter, following a slowdown in growth that began in the final quarter of 2022.
LIRA market analysis
Home remodeling activity continues to face strong headwinds from high interest rates, softening house price appreciation and sluggish home sales. Annual spending on homeowner improvements and repairs is expected to decrease from $486 billion through the second quarter of this year to $457 billion over the coming four quarters.
The ongoing reductions in household moves will cause a decline in the remodeling and repair activity that typically occurs around the time of a home sale. The magnitude of the impact may be offset if owners who are locked into their current homes with ultra-low mortgage rates continue to renovate to meet changing needs or take advantage of new federal incentives for energy-efficiency retrofits.
R&R expected to decline
“Higher interest rates and sharp downturns in homebuilding and existing home sales are driving our projections for sluggish remodeling activity next year,” says Carlos Martín, project director, Remodeling Futures Program at JCHS, from a LIRA released in April. “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.”
“Homeowner improvement and maintenance spending is expected to top out at $458 billion in the coming year, compared with market spending of $471 billion over the past four quarters,” says Abbe Will, associate project director, Remodeling Futures Program, in an April release. “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.”
