Cambridge, MA – The healthy gains in residential remodeling activity estimated for 2014 and the first part of 2015 are expected to decelerate, but then gain a little more traction by the end of the year, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual spending for home improvements will increase a more modest 2.9% in 2015.”

“One of the largest contributors to this dampening of remodeling growth in 2015 is the sluggish existing home sales activity last year,” says Chris Herbert, Managing Director of the Joint Center. “Housing turnover typically sparks significant improvement spending as new owners customize their recent purchases to fit their needs and, with sales down last year, remodeling will feel the effects this year.”

“Moving forward, signs of higher growth in remodeling activity include strengthening retail sales of building materials,” says Abbe Will, a research analyst in the Remodeling Futures Program at the Joint Center. “Also, rising home equity and still favorable interest rates continue to encourage owners to reinvest in their homes.”

NOTE ON LIRA MODEL: Beginning with the first quarter 2014 release, long-term interest rates were removed from the LIRA estimation model. For more information on the reasons for and implications of this change, please visit our blog.

The Leading Indicator of Remodeling Activity (LIRA) is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry. The development of the LIRA is detailed in “Developing a Leading Indicator for the Remodeling Industry” (JCHS Research Note N07-1). In July 2008, the LIRA was re-benchmarked due to changes in the underlying reference series. These changes are explained in “Addendum to Research Note N07-1: Re-Benchmarking the Leading Indicator of Remodeling Activity” (JCHS Research Note N08-1). The LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter’s closing. The next LIRA release date is April 16, 2015.

The Remodeling Futures Program, initiated by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States. The Program seeks to produce a better understanding of the home improvement industry and its relationship to the broader residential construction industry.