During the recession, home sales slowed significantly. At the same time, homeowners put the brakes on remodeling expenditures. High-end kitchen and bathroom remodeling went out of style, especially since homeowners were afraid they wouldn’t recoup any of their investment in the stalled housing market. Expenditures that did take place during the recessing were largely related to replacement of worn out items or energy efficiency improvements.
Between the first and second quarters of 2010, homeowner improvements fell 4.2%. Expenditures dropped from $114 billion to $110 billion. This data is based on the Leading Indicator of Remodeling Activity (LIRA) developed by the Joint Center for Housing Studies of Harvard University.
LIRA numbers indicate the following expected spending scenario for the next 3 quarters:
- Quarter 3 2010 $107 billion (-4.1%)
- Quarter 4 2010 $117 billion (+5.0%)
- Quarter 1 2011 $128.8 billion (12.4%)
If these projections hold up, home remodeling spending in the 1st quarter of 2011would surpass what homeowners spent in the 1st quarter of 2009 but would still be far short of the $146.2 billion spent in the 2nd quarter of 2008.
In developing the projections, Harvard researchers look at a number of economic factors, including retail sales, building material shipments, hours worked by remodeling contractors, the pending home sales index, and the manufacturing survey index.
Eric S. Belsky, managing director of the Joint Center for Housing Studies says “absent a reversal of recent economic progress, there should be a healthy upturn in home improvement activity by year-end and into next year.” These projections also indicate that home remodelers and building supply stores will launch new marketing campaigns as well.[Source: Remodeling Spending Expected to Accelerate Moving into 2011. Joint Center for Housing Studies. Harvard University. 15 Jul. 2010. Web. 21 Jul. 2010. ]