Remodeling Trend May Dull by Year’s End (April 21)

Uncertainty about the economy and a languishing housing industry may slow remodeling activity in the second half of this year – or at least that the opinion of the Remodeling Futures Program at the Joint Center for Housing Studies.

Click image to enlargeThe group’s Leading Indicator of Remodeling Activity (LIRA) four-quarter moving total will is estimated to hit $130.2 billion in this year’s second quarter, the best result since the $132.2 billion in the first quarter of 2008.

However, the LIRA points down from July-December this year, with the fourth quarter estimate of $115.2 billion only 0.2 percent ahead of the end of last year.

“Given all the economic uncertainty that we’re seeing nationally, the home improvement recovery is expected to be rocky,” says Eric S. Belsky, managing director of the Joint Center. “Spending patterns through the remainder of the year are expected to reflect recent volatility in the housing market.”Click image to enlarge

“Recent softness in the housing market and continued pessimism among remodeling contractors point to a slowdown in the remodeling market toward the end of the year.” says Kermit Baker, director of the Remodeling Futures Program .

The LIRA is designed to estimate national homeowner spending on improvements. 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.

The LIRA offers a running 12-month total, adjusted every quarter, that is used to anticipate developments in the next three quarters. While it tracks sales of certain materials used in remodeling, such as wood, the LIRA doesn’t take into account other allied products, such as hard surfaces for countertops and flooring.

While the LIRA offers an estimate into future directions of the market, it’s also far from infallible when matched with actual figures. The indicator, for example, offered a rocky 2010 prediction with a low of $106.5 in the second quarter. (See second chart, at upper right, from April 2010,) U.S. Census Bureau data now shows a recalculation of second quarter 2010’s LIRA to be $118 million.

The highest LIRA level came in 2007’s second quarter at $146.2 billion.

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