American spending on home improvements and repairs has seen steady growth as the slow housing market has convinced many to stay put and renovate instead. But this growth is expected to slow in the coming year, according to a new report released by the Joint Center for Housing Studies of Harvard University.
Harvard’s Leading Indicator of Remodeling Activity predicts that residential remodeling expenditures will reach 7.7% this year – the highest level in a decade – but then shift to a downward trend in next year, falling to 6.6% by the third quarter of 2019.
Chris Herbert, managing director of the Joint Center for Housing Studies, explained that while remodeling activity will still be strong, it will be tempered by rising interest rates and low home sales activity. This is because homebuyers represent a portion of those who spend money to renovate.
“Low for-sale inventories are presenting a headwind because home sales tend to spur investments in remodeling and repair both before a sale and in the years following,” Herbert said.
But while the housing market’s slowdown may dampen renovation spending, it will still remain strong.
“Even so, many other remodeling market indicators including home prices, permit activity, and retail sales of building materials continue to strengthen and will support above-average gains in spending next year,” says Abbe Will, associate project director in the Remodeling Futures Program at the Joint Center.
“Through the third quarter of 2019, annual expenditures for residential improvements and repairs by homeowners is still expected to grow to over $350 billion nationally," Will added.