U.S. Remodel Growth Delayed
Residential redos will be strong going into 2011, according to data from the Remodeling Futures Project at Harvard University’s Joint Center for Housing Studies. The group’s economic index – the Leading Indicator of Remodeling Activity (LIRA) – shows a steady rise through next year’s first quarter.
However, where that upturn occurs – and by how much – differs now from estimates the group released in mid-April.
LIRA offers a running 12-month total, adjusted every quarter, that is then used to anticipate developments in the next three quarters. The indicator 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.
LIRA 1Q 2010 estimates released in mid-April showed a bottoming-out in this year’s second quarter, with a four-quarter average of $106.5 billion. After that, LIRA showed steady growth through 2010, ending the year at $121.5 billion.
The 2Q 2010 estimates offered today showed a better second-quarter LIRA at $110.9 million – but then a dip downward to $107.7 billion in the current third quarter, the lowest in more than six years. Remodeling then turns the corner, with LIRA moving past $120 billion – but not until first-quarter 2011 ($128.8 billion).
At the end of 2010, however, LIRA would show positive growth in a calendar year, which hasn’t happened since 2006.
“Absent a reversal of recent economic progress, there should be a healthy upturn in home improvement activity by year-end and into next year,” says Eric S. Belsky, managing director of the Joint Center for Housing Studies.
The study group also sees renewed homeowner optimism as the year progresses.
“The recovery in home improvement activity appears to be moving beyond simple replacement projects and energy retrofits to broader remodels and upgrades,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies. “A wider activity base would help generate the expected growth in the quarters ahead.”
The highest LIRA level came in 2007’s second quarter at $146.2 billion.
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